A positive externality exists when
A)a person's or group's actions cause a benefit that is felt by others.
B)a person's or group's actions cause a cost that is felt by others.
C)the market output is greater than the socially optimal output.
D)the socially optimal level of output is equal to the market output.

Question

Quizplus · Accepted Answer

A positive externality occurs when a market transaction between a buyer and a seller results in benefits to third parties who were not directly involved in the transaction. For example, planting trees on private property provides a positive externality by improving air quality and providing shade for the community. The person planting the trees receives the private benefit of a nice yard, while the community receives the external benefit of cleaner air and more shade.

A Positive Externality Exists When