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9 May, 13:13

Which of the following describes a positive externality? Select one: a. You buy a new jacket you really enjoy b. The government imposes a tax on cigarettes in order to discourage smoking among teenagers. c. John Henry paints the inside of his house in order to increase its market value just before he puts the house up for sale. d. People who do not attend college still benefit from others who receive a college education.

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  1. 9 May, 14:47
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    Answer: Option D

    Explanation: In simple words, positive externality refers to the the situation in which a party gets benefit for a decision which it did not choose to occur.

    In the given case, option D reflects a positive externality since the college students who decided to not college benefits from the college pass out students. The two parties made their own individual decision but the later got the benefit from the former.

    Hence the correct option is D.
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