Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
They decrease overall production costs.
B
They increase the total benefits to society beyond the individual producer's profit.
C
They lead to market failures by creating inefficiencies.
D
They reduce competition among firms.
Understanding the Answer
Let's break down why this is correct
Answer
Positive externalities in production occur when a company's activities benefit others who are not directly involved in the transaction. For example, when a factory invests in cleaner technology, it not only reduces pollution but also improves air quality for the surrounding community. This enhancement in air quality can lead to better health for residents, which ultimately reduces healthcare costs and increases productivity. As more businesses adopt environmentally friendly practices, these positive outcomes can lead to a healthier society overall, contributing to social welfare. Therefore, positive externalities help create a better quality of life for everyone, not just those directly involved in the production process.
Detailed Explanation
Positive externalities happen when a producer's actions benefit others. Other options are incorrect because Some might think that positive externalities lower costs for producers; It's a common mistake to think positive externalities cause problems in the market.
Key Concepts
social welfare
Topic
Positive Externalities in Production
Difficulty
easy level question
Cognitive Level
understand
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