A local government is considering subsidizing a community park to encourage more residents to use it. They believe that the park's benefits extend beyond just the individuals using it, as it improves local property values and provides environmental benefits. Based on your understanding of externalities, which of the following best explains why this subsidy might be necessary?

Externalities are effects that a decision or action has on people who are not directly involved in that decision. In the case of the community park, when more residents use it, they enjoy the space, but there are also benefits for the whole neighborhood, like increased property values and a healthier environment. These positive effects are not captured in the market price of using the park, meaning that the park might be underused if people only consider their personal enjoyment. By subsidizing the park, the local government can encourage more residents to use it, helping everyone enjoy the benefits. For example, if the park attracts more families, nearby homes may increase in value, benefiting those homeowners who may not even use the park regularly.