If a new community center is built, which of the following scenarios best illustrates the positive externality associated with this project, while also considering the social costs involved?

A positive externality of a new community center occurs when its use benefits people who did not pay for it, such as residents who improve their health and social ties by attending free classes or events, thereby raising the overall well‑being of the neighborhood. This benefit is not reflected in the price of admission, so the private cost of building the center is lower than the full social cost, which also includes maintenance, utilities, and any potential noise or traffic disruptions. The social optimum is reached when the marginal social benefit of the center equals its marginal social cost; in practice this means the city should consider not only construction expenses but also ongoing upkeep and any negative side effects. For example, a city might decide to add a small parking lot to reduce traffic congestion, thereby reducing the external cost of increased vehicle use, and thus achieve a more socially optimal outcome. This scenario illustrates how the community center’s benefits to the wider public can outweigh its costs when properly managed.