Analyzing Economic Scenarios
Consider the two scenarios below:
Scenario A: A software company invests heavily to develop a new project management tool. They sell subscriptions to this tool for a profit. As a side effect, other companies in the industry observe the success of this new tool's features and are inspired to improve their own competing products, leading to a general increase in productivity software quality across the market.
Scenario B: A group of volunteer astronomers spends their free time and uses their own personal telescopes to scan the sky for potentially hazardous near-earth asteroids. When they discover one, they publish the coordinates freely and immediately for all space agencies and research institutions in the world to use for tracking and potential deflection planning.
Analyze both scenarios. For each one, determine whether the primary outcome for society (improved software quality in A, asteroid data in B) is better described as a positive externality or a public good. Justify your classifications by focusing on the private costs and benefits for the individuals providing the service.
0
1
Tags
Social Science
Empirical Science
Science
CORE Econ
Economy
Economics
Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
Ch.10 Market successes and failures: The societal effects of private decisions - The Economy 2.0 Microeconomics @ CORE Econ
Analysis in Bloom's Taxonomy
Cognitive Psychology
Psychology
Related
Positive Externality Example: A Beautiful Garden
A beekeeper maintains several hives to produce and sell honey. A significant side effect is that the bees pollinate a large, neighboring commercial apple orchard, substantially increasing the orchard's fruit yield. Based on an analysis of the costs and benefits, why is this pollination service best classified as a positive externality rather than a pure public good?
Classifying a Community Project
Analyzing Economic Scenarios
Vaccines: Public Good or Positive Externality?
A large technology company invests heavily in a comprehensive training program for its new software developers. This program significantly boosts the productivity and innovation within the company. Over time, some of these highly skilled developers leave to work for smaller startups in the same city, bringing their advanced knowledge with them. How should the resulting increase in the skill level of the city's overall developer workforce be classified, and why?
A homeowner installs an expensive outdoor lighting system to improve the security and appearance of their own property. This lighting also illuminates the public sidewalk, increasing safety for nighttime pedestrians. Why is this increased sidewalk safety best classified as a positive externality rather than a public good?
A city government funds a project to offer free, city-wide wireless internet access. The system is designed so that one person's use does not slow down the network for others, and it is open for any resident or visitor to connect. The project is funded by general tax revenue.
Statement: This service is best described as a positive externality because it provides benefits to people, such as visitors, who did not directly pay the taxes to fund it.
Analyze each scenario by considering who bears the cost and who receives the primary benefit. Match each scenario to the economic concept it best illustrates.
Evaluating Public Policy Proposals
Lake Weed Management Dilemma