Tammy installed a set of wind chimes in her backyard. She enjoys listening to the musical tones when the breeze hits them. Her neighbor Steven also enjoys the chimes, buther other neighbor Sally hates the constant noise. Tammy's wind chimes
A) create a negative externality for Steven and a positive externality for Sally
B) are not related to the issue of property rights since all parties are homeowners
C) are an example of an efficient market since the benefits to one party are balanced by costs to another party
D) are a public good because all three parties can hear the wind chimes
E) create a positive externality for Steven and a negative externality for Sally

Question

Quizplus · Accepted Answer

Tammy's wind chimes create a positive externality for Steven because he enjoys the chimes, which is a benefit he receives without any effort or cost on his part. Conversely, the chimes create a negative externality for Sally because she finds the noise bothersome, which is a cost she incurs without having a say in the matter.

Tammy Installed a Set of Wind Chimes in Her Backyard