Which of the Following Would Be Classified as a Positive

question 34

Multiple Choice

Which of the following would be classified as a positive externality?

• A) a surcharge for ambulance service is shifted to property taxes
• B) reselling outdated textbooks to under-funded public schools
• C) removing government education subsidies for public schools
• D) converting a derelict empty lot to a public vegetable garden

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Definitions:

Endowment Effect

The tendency people have to place higher valuations on items they possess (are endowed with) than on identical items that they do not possess; perhaps caused by loss aversion.

Time Inconsistency

The tendency of certain conditions or decisions to change over time, especially in the context of economic planning and policy-making.

Prospect Theory

A behavioral economics theory of preferences having three main features: (1) people evaluate options on the basis of whether they generate gains or losses relative to the status quo; (2) gains are subject to diminishing marginal utility, while losses are subject to diminishing marginal disutility; and (3) people are prone to loss aversion.

Behavioral Economists

Economists who study how psychological, social, cognitive, and emotional factors affect economic decisions and market outcomes.