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Chapter 12: Q.15 (page 296)

Give an example of a positive externality and an example of a negative externality.

Short Answer

Expert verified

An example of positive externality - Tree plantation by a firm

An example of a negative externality - Pollution

Step by step solution

01

Externality : 

When an economic activity has an impact on individuals, it is called an externality.

Positive Externality :

Positive externality occurs as a result of the producers' or customers' behavior. It is consumption or production that can have a positive impact on third parties.

Negative externality :

Negative Externality refers to the unexpected repercussions of production and consumption that must be borne by others.

02

Example of positive externality :

A company's tree-planting programme is an excellent example of positive externality, especially in today's world. When a company plants trees, the entire ecosystem is improved, and not only the company, but the entire society benefits.

03

Example of negative externality : 

An example of a negative externality is the pollution. The use of fossil fuels such as coal, petroleum, and others results in the depletion of non-renewable resources, which has a significant environmental impact. Using these sorts of fuels results in the release of a variety of hazardous gases, which contribute to global warming as well as a variety of illnesses.

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Most popular questions from this chapter

Suppose you want to put a dollar value on the external costs of carbon emissions from a power plant. What information or data would you obtain to measure the external [not social] cost?

In the tradeoff between economic output and environmental protection, what do the combinations on the protection possibility curve represent?

Refer to Table 12.2. The externality created by the refrigerator production was \(100. However, once we accounted for both the private and additional external costs, the market price increased by only \)50. If the external costs were \(100 why did the price only increase by \)50 when we accounted for all costs?

From an economist's perspective, is it sound policy

to pursue a goal of zero pollution? Why or why not?

An emissions tax on a quantity of emissions from a firm is not a command-and-control approach to reducing pollution. Why?
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