Positive externalities arise when
A) an unprofitable firm is shut down.
B) a profitable firm is regulated.
C) tax rates are reduced.
D) production of a good generates benefits that spill over to third parties.

Question

Quizplus · Accepted Answer

Positive externalities occur when the production of a good generates benefits that are not fully reflected in the market price paid by consumers, and spill over to third parties who do not pay for or receive compensation for those benefits. For example, planting trees helps improve air quality not just for the planter, but for the surrounding community as well.

Positive Externalities Arise When