Which of the following is an example of an external benefit?
A)The benefit to a consumer from watching a film on DVD
B)The improvement in air quality resulting from industrial development in an urban area
C)The increase in the value of a property belonging to a neighbor when you hire a landscaper to beautify your front yard
D)The reduction in property values when a new airport is built in a neighborhood, increasing the connectivity of the area with other cities
E)The increase in the demand for a good when the price of its substitute good increases

Question

Quizplus · Accepted Answer

External benefits, or positive externalities, occur when a third party benefits from an economic transaction they are not directly involved in. In choice C, the neighbor benefits from the improved appearance of the area due to the landscaping without having to pay for it, which is a classic example of an external benefit.

Which of the Following Is an Example of an External