📚 Learning Guide
Externalities in Economics
easy

Which of the following is an example of a positive externality?

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Learning Path
Learning Path

Question & Answer
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3
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Choose the Best Answer

A

A person planting a tree that provides shade to others

B

A factory polluting a river

C

A driver causing traffic congestion

D

A homeowner increasing property taxes

Understanding the Answer

Let's break down why this is correct

Answer

A positive externality occurs when an action by one person or business has beneficial effects on others who are not directly involved. For example, if a homeowner decides to plant beautiful flowers and maintain a well-kept garden, it not only improves their property but also makes the neighborhood look nicer for everyone. As a result, property values may increase, and neighbors may feel happier walking in their area. This is a positive externality because the homeowner’s decision to beautify their yard positively impacts others without them having to pay for it. So, in this case, the benefits extend beyond the homeowner to the whole community.

Detailed Explanation

When someone plants a tree, it helps others by providing shade. Other options are incorrect because Pollution from a factory harms the environment; Traffic congestion makes it harder for everyone to get around.

Key Concepts

positive externalities
Topic

Externalities in Economics

Difficulty

easy level question

Cognitive Level

understand

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