Which of the following activities represents an external benefit?
A) the decrease in travel time for someone who flies a lot when a new airport is built in their neighbourhood
B) the increase in the value of property belonging to your neighbours when you hire a landscaper to beautify your front yard
C) the profits owners get from the building of a new factory
D) the benefit to a consumer from watching a film on DVD

Question

Quizplus · Accepted Answer

An external benefit, or positive externality, occurs when a third party not directly involved in a transaction benefits from it. In choice B, neighbors benefit from the increased property value due to someone else's investment in landscaping, which they did not pay for, making it an external benefit. Choices A, C, and D primarily describe benefits to individuals directly involved in the activities, not external parties.

Which of the Following Activities Represents an External Benefit