Which of the following activities, if any, represents an external cost?
A)The reduction in the incidence of chicken pox when children are inoculated against the disease.
B)The damage to a person's health from secondhand smoke.
C)The increase in local property values when the city creates a neighborhood park.
D)The price you pay for the prime rib that you consume at a local restaurant.

Question

Which of the following activities, if any, represents an external cost?
A)​The reduction in the incidence of chicken pox when children are inoculated against the disease.
B)​The damage to a person's health from secondhand smoke.
C)​The increase in local property values when the city creates a neighborhood park.
D)​The price you pay for the prime rib that you consume at a local restaurant.

Quizplus · Accepted Answer

Secondhand smoke causes health problems for those who are exposed to it, which represents a negative externality, or external cost.

Answer: C
 The creation of a neighborhood park can increase local property values, which represents a positive externality, or external benefit.

Which of the Following Activities, If Any, Represents an External