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External Economy (Positive Externality or External Benefit)
A positive external effect arises when an economic decision confers an uncompensated benefit on other people who are not party to the decision, and this benefit is not considered by the decision-maker. This concept is also referred to as an external benefit or a positive externality.
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Economics
Economy
Introduction to Microeconomics Course
CORE Econ
Social Science
Empirical Science
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Internalizing an Externality
Negative Externality Example: Robot Factory and Nurses
Positive Externality (External Economy)
Inadequate Property Rights as a Cause of Externalities
Consumption Externalities
An apple orchard operates next to a beekeeper. The bees pollinate the apple blossoms, which increases the orchard's fruit yield. The apple blossoms, in turn, provide nectar for the bees, which increases the beekeeper's honey production. Neither party pays the other for these services. Which statement provides the most accurate economic analysis of this situation?
Residential Development and Air Quality
Market Outcome of Uncompensated Costs
Match each scenario to the economic description that best characterizes the primary effect described.
Policy Evaluation for a Noise Externality
A large chemical company has a manufacturing division that releases pollutants into a river. Downstream, another division of the same company operates a fish farm, which suffers reduced yields due to the pollution. This situation is an example of a negative externality.
Arrange the following events in the correct logical sequence to illustrate how a negative production externality leads to an inefficient market outcome.
When an individual chooses to get vaccinated against a contagious disease, they not only protect themselves but also reduce the likelihood of transmission to others in their community. This uncompensated benefit conferred upon the community is an example of a ________.
Evaluating the Root Cause of a Shared Resource Problem
Analyzing Production Costs and Externalities
Marginal Private Cost (MPC) (Definition)
Marginal Social Benefit (MSB) (Definition and Formula)
Pigou's Rationale for Intervention in Case of Externalities
Divergence between Private and Social Costs
Analyze each economic scenario and match it to the correct economic concept.
Separate Ownership as a Cause of Externalities
Incomplete Contracts and Asymmetric Information as a Source of Externalities
Definition of External Effect (Externality)
External Economy (Positive Externality or External Benefit)
External Diseconomy (Negative Externality or External Cost)
Interpreting Public Goods and Shared Resources Problems as Externalities
Missing Markets as an Explanation for Unaccounted Social Costs
External Effects as the Cause of Social Dilemmas
Learn After
A city government decides to fund the restoration of a historic downtown building, which is privately owned but has fallen into disrepair. After the restoration, the building's beautiful facade and new ground-floor cafe attract more tourists to the area, significantly increasing sales for neighboring shops and restaurants that were not involved in the restoration project. This increase in business for the neighboring shops is an example of what?
A firm is operating at its profit-maximizing level of employment, which occurs at the point where its isoprofit curve is tangent to the no-shirking wage curve. If this firm were to hire additional workers, moving to a point further along the no-shirking wage curve, what would be the consequence for its profit and why?
Analyzing Uncompensated Benefits in Research & Development
Analyzing the Societal Impact of Vaccination Decisions
A company that manufactures electric vehicles is re-evaluating its production process. It decides to invest in advanced robotics to automate the assembly line, which will reduce the number of human workers needed per vehicle. The company also signs a new contract with a different supplier for lithium, a key component in its batteries. Which statement best analyzes the changes in the company's use of factors of production?
Analyzing Societal Benefits of Private Education
A large software company invests heavily in an advanced coding training program for its new employees. This training significantly improves their skills, leading to higher productivity and better software products for the company. Over the next few years, some of these highly-trained employees leave to work for smaller, local tech startups that could not afford such a comprehensive training program themselves. Which of the following outcomes best represents an uncompensated benefit received by a third party in this situation?
Evaluating Policy for Agricultural Externalities
Analyzing Third-Party Benefits of Corporate Investment
An apple orchard owner pays a nearby beekeeper to place hives in the orchard to improve crop pollination. The improved pollination resulting from this arrangement is an example of a positive externality.