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Classifying Positive Externalities
Consider the two scenarios below. For each, identify whether it represents a positive production externality or a positive consumption externality. Justify your classification by explaining how the source of the external benefit (the act of producing a good/service versus the act of consuming one) determines the type.
Scenario A: A forestry company plants more trees than it harvests, which improves local air quality and provides a habitat for wildlife.
Scenario B: An individual purchases and installs a high-quality security camera system for their home, which deters potential criminals from the entire neighborhood.
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Classifying Positive Externalities