Externalities can be positive because
A) marginal damages do not last over time.
B) utility can be impacted positively as well as negatively.
C) there is no concept for marginal benefit.
D) positive externalities are subsidies.

Question

Quizplus · Accepted Answer

Externalities can lead to positive impacts on utility, such as when a neighbor plants a beautiful garden that enhances the aesthetic value of the entire community. While externalities are commonly discussed in terms of negative impacts, they can also have positive effects. Option A is incorrect because marginal damages can certainly last over time. Option C is incorrect because there is a concept for marginal benefit, and it is a key consideration in economic decision-making. Option D is incorrect because positive externalities are not subsidies.

Externalities Can Be Positive Because