An example of a positive externality is
A Increased business profits from a new advertising campaign.
B Increased health problems from air pollution.
C Lower Covid infection rates because of increased use of masks by the population.
D None of the choices are correct.
The correct answer and explanation is:
The correct answer is C: Lower Covid infection rates because of increased use of masks by the population.
Explanation:
A positive externality occurs when a person or group’s actions benefit others who are not directly involved in the activity, without compensation. It is an unintended and beneficial side effect that impacts third parties. In this case, the increased use of masks during the Covid-19 pandemic not only helped the individual wearer reduce their own risk of infection but also protected others in the community from contracting the virus. This is a clear example of a positive externality because it involves a beneficial spillover effect from an action (mask-wearing) that was primarily aimed at reducing personal risk, but which also reduced infection rates for others.
Now, let’s break down why the other options are incorrect:
- A: Increased business profits from a new advertising campaign: This is not a positive externality because the profits benefit only the business that launched the campaign, not the broader community or third parties. A positive externality would involve an unintended benefit to others, such as when businesses create jobs or provide services that improve societal well-being.
- B: Increased health problems from air pollution: This is actually a negative externality, not a positive one. It represents a harmful side effect of pollution, which affects people’s health and is a cost that is not borne by those causing the pollution but rather by society as a whole.
- D: None of the choices are correct: This option is incorrect because option C correctly identifies a positive externality.
In summary, option C reflects a positive externality because it demonstrates an action (mask-wearing) that resulted in broader societal benefits, lowering Covid infection rates and improving public health outcomes.