Aaron has a tree in which bats like to perch.He is worried his children will catch a disease from the droppings if they play in the garden, but knows the droppings are also good fertiliser for the garden.These effects of the bats perching in the trees are examples of:
A)why it is complicated to devise policies for externalities
B)negative externalities
C)both positive and negative externalities
D)why governments should leave the market to find solutions to externalities

Question

Quizplus · Accepted Answer

The droppings are a positive externality for the garden as they act as a fertilizer, but a negative externality for Aaron's children as they may catch a disease. This shows that there are both positive and negative externalities present in this situation, making it complicated to devise policies to address them. It also highlights the need for government intervention to find solutions to such externalities, as leaving it to the market may not necessarily result in an optimal outcome for all parties involved.

Aaron Has a Tree in Which Bats Like to Perch