Which of the following generates a positive externality?
A) You buy a new car and find $5,000 in the door panel.
B) Your next-door neighbor mows the lawn at 6 A.M.
C) Your next-door neighbor installs a bat house and the bats eat mosquitoes.
D) Joe buys health insurance but decides not to take the time to get a flu shot.

Question

Quizplus · Accepted Answer

A positive externality occurs when a third party benefits from an economic transaction they are not directly involved in. In this case, the bats installed by the neighbor reduce the mosquito population, benefiting others in the area.

Which of the Following Generates a Positive Externality