What is an example of a positive externality?
Understand the Problem
The question is asking for an illustration of a positive externality, which refers to a benefit that is enjoyed by society or a third party as a consequence of an economic action. An example would highlight how a particular activity has beneficial effects beyond the individual or organization that initiated it.
Answer
A company developing a new building that benefits the community.
An example of a positive externality is when a company tears down an abandoned building and constructs a new office or apartment building that enhances the surrounding community.
Answer for screen readers
An example of a positive externality is when a company tears down an abandoned building and constructs a new office or apartment building that enhances the surrounding community.
More Information
The presence of a new office or apartment building can lead to increased property values, improved neighborhood aesthetics, and might attract further businesses or residents to the area, benefiting those who did not directly participate in the construction.
Tips
A common mistake is to confuse positive externalities with private benefits, which are benefits that only the parties directly involved in a transaction receive.
Sources
- Positive Externality - britannica.com
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