Education spending creates knowledge benefits for people who do not directly pay for them. What does this show?
Answer and explanation
Correct answer: Positive externality
The governing concept is a positive externality: an activity creates benefits for third parties who are not involved in the original transaction. Education benefits the student privately, but a more skilled, informed and healthier population can benefit others as well. Therefore, option C is correct. Option B describes spillover harm, option D is a redistribution payment, and option A concerns spending that offsets damage.
Frequently asked questions
What is the correct answer to this question?
Positive externality
Why is this the correct answer?
The governing concept is a positive externality: an activity creates benefits for third parties who are not involved in the original transaction. Education benefits the student privately, but a more skilled, informed and healthier population can benefit others as well. Therefore, option C is correct. Option B describes spillover harm, option D is a redistribution payment, and option A concerns spending that offsets damage.
Which subject and chapter does this question cover?
This is a Class 11 Economics question. Chapter: National Income and Related Aggregates. Topic: GDP and Welfare.
