📚 Learning Guide
Analyzing Market Equilibrium with Externalities
easy

Positive externalities in a market can be compared to which of the following scenarios in terms of social benefit versus private benefit? A:B :: C:?

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Learning Path
Learning Path

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Choose the Best Answer

A

A public park that increases property values: A private garden that does not affect neighbors

B

A vaccine that protects individuals: A candy that only satisfies hunger

C

A concert that draws a crowd: A single musician playing at home

D

A new highway that reduces commute time: A local road with no traffic issues

Understanding the Answer

Let's break down why this is correct

Answer

Positive externalities occur when a person's or company's actions benefit others who are not directly involved in the transaction. This can be compared to the scenario of public parks. Just as a public park provides joy and relaxation to everyone in the community, even if they don't pay for its upkeep, positive externalities create a situation where the social benefit is greater than the private benefit. For example, if a company invests in training its employees, the skills they gain not only help the company but also contribute positively to the community as those employees become more productive and engaged citizens. Therefore, the relationship can be summarized as A:B :: Public Parks:Positive Externalities.

Detailed Explanation

A public park helps everyone by making the area nicer. Other options are incorrect because This option confuses personal benefit with social benefit; This choice misses the idea of shared benefits.

Key Concepts

Market Equilibrium
Externalities
Social Optimality
Topic

Analyzing Market Equilibrium with Externalities

Difficulty

easy level question

Cognitive Level

understand

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