An Example of an Activity That Creates a Positive Consumption

question 95

Multiple Choice

An example of an activity that creates a positive consumption externality is

• A)logging,which pollutes rivers.
• B)locating beehives next to an orange orchard.
• C)smoking,which harms the health of a bystander.
• D)a flu vaccination.
• E)a noisy party.

---

Definitions:

Economic Efficiency

A state where resources are allocated in a way that maximizes the production of goods and services without wasting any resources.

External Benefit

A benefit that results from an activity but affects uninvolved third parties who did not choose to incur that effect, often leading to market inefficiencies.

Inefficient Equilibrium

A state in a market where resources are not allocated optimally, leading to wastage or loss of potential gain.

Price and Quantity

The relationship between the price of an item and how much of that item is available or demanded at that price point.