A local bakery decides to use organic ingredients and implement sustainable practices in its production process. As a result, neighboring farmers experience an increase in pollination and crop yields. How does this scenario illustrate the concept of positive externalities in production?

Positive externalities in production occur when a business's actions benefit others who are not directly involved in the transaction. In this case, the local bakery's choice to use organic ingredients and sustainable practices helps nearby farmers by improving pollination, which leads to better crop yields. This is a positive externality because the farmers gain advantages from the bakery's decisions without having to pay for them. For example, if the bakery's organic practices attract more bees to the area, the farmers will have more pollinators available, resulting in healthier and more abundant crops. Thus, the bakery contributes to the community's agricultural success, showcasing how one business's responsible choices can positively impact its surroundings.