A positive externality ________.
A) gives rise to external benefits
B) leads to increasing returns to scale
C) imposes an additional cost on society
D) leads to a higher economic profit

Question

Quizplus · Accepted Answer

A positive externality gives rise to external benefits, which are benefits received by individuals or firms that are not reflected in market prices. For example, education is a positive externality because it not only benefits the individual who receives it but also benefits society as a whole by reducing crime, increasing productivity, and improving health outcomes. These external benefits are not fully captured by the market, which can lead to underinvestment in education.

A Positive Externality ________