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Which of the following is an example of a positive externality?

Answer and explanation

Correct answer: Spread of knowledge in society through education

A positive externality occurs when an activity gives benefits to people who are not fully involved in the transaction. Education benefits the student directly, but educated people can also share knowledge, improve cooperation and contribute to society. Thus, the social benefit exceeds the private benefit. Pollution examples create harmful, or negative, externalities, so option C is correct.

Related tags

Positive ExternalityEducationKnowledge SpilloverGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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