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In which situation may actual welfare exceed recorded market value because of a positive externality?

Answer and explanation

Correct answer: Vaccination reducing infection in the community

A positive externality exists when an activity creates benefits for third parties that are not fully reflected in the buyer's private payment. Vaccination protects the recipient and lowers the probability of infection for other community members, so its social benefit exceeds its private market valuation. C is correct. Smoke and deforestation create negative externalities, while crime-related security spending does not represent this positive spillover.

Related tags

VaccinationPositive ExternalitySocial BenefitGdp And WelfareNational Income And Related AggregatesEconomicsClass 11 Mcq

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