Learning Path
Question & Answer
Choose the Best Answer
A homeowner plants a garden that beautifies the neighborhood.
A factory emits pollution that affects nearby residents.
A restaurant's waste management causes increased traffic congestion.
A taxi service charges high prices during peak hours.
Understanding the Answer
Let's break down why this is correct
When the homeowner plants a garden, it looks nicer for everyone nearby. Other options are incorrect because The factory emits pollution that harms people; Restaurant waste causing traffic congestion is a negative externality.
Key Concepts
Externalities and Social Optimum
easy level question
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Deep Dive: Externalities and Social Optimum
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Definition
Externalities occur when the marginal social benefit or cost of a good differs from the private benefit or cost. The socially optimal output level accounts for externalities, aiming to align production with maximum social welfare by considering all costs and benefits. Understanding externalities is crucial to address market inefficiencies and achieve overall welfare maximization.
Topic Definition
Externalities occur when the marginal social benefit or cost of a good differs from the private benefit or cost. The socially optimal output level accounts for externalities, aiming to align production with maximum social welfare by considering all costs and benefits. Understanding externalities is crucial to address market inefficiencies and achieve overall welfare maximization.
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