3.8.4 Positive and negative externalities in consumption and production

• What is an example of a positive externality?

  Vaccination
• Externalities occur when the production or consumption of a good or service affects third parties who are not involved in the transaction
• Negative externalities harm third parties.


  True
• Externalities in consumption arise from the impact of consumer behavior
• Negative consumption externalities harm third parties.

  True
• What is an example of a positive externality in production?

  Using renewable energy
• Match the type of consumption externality with its definition:

  Positive ↔️ Benefits third parties from consumption

  Negative ↔️ Harms third parties from consumption
• Positive consumption externalities create benefits for third parties, such as improved public health
• Steps to differentiate between positive and negative consumption externalities:

  1️⃣ Identify the type of consumption externality

  2️⃣ Determine if the effect is beneficial or harmful to third parties

  3️⃣ Provide an example to illustrate the effect
• What is an example of a positive consumption externality from vaccination?

  Reduced healthcare costs
• Positive externalities from vaccination protect others from disease.

  True
• What is an example of a positive consumption externality from buying an electric car?

  Reduced carbon emissions
• Positive externalities occur when third parties receive benefits
• Negative externalities occur when third parties suffer harms
• What is an example of a positive externality in consumption?

  Buying an electric car
• What is an example of a negative externality in production?

  Pollution from factories
• Match the type of externality with its example:

  Positive Externalities ↔️ Vaccination protects others from disease

  Negative Externalities ↔️ Pollution from factories affects local residents

  Externalities in Consumption ↔️ Buying an electric car reduces carbon emissions
• What is an example of a positive consumption externality?

  Buying an electric car
• Consumption externalities impact third parties who are not directly involved in the consumption
• Positive externalities benefit third parties.


  True
• What is an example of a positive consumption externality from buying an electric car?

  Improved air quality
• Negative consumption externalities impose costs on third parties not involved in the consumption activity.


  True
• Externalities can arise from both consumption and production
• Match the type of externality with its example:

  Positive Externalities ↔️ Vaccination protects others from disease

  Negative Externalities ↔️ Pollution from factories affects nearby residents

  Externalities in Consumption ↔️ Buying an electric car reduces carbon emissions

  Externalities in Production ↔️ Using renewable energy reduces fossil fuel reliance
• Consumption externalities refer to the effects of consumer behavior on third parties.
• What is an example of a negative consumption externality?

  Smoking in public
• Negative consumption externalities impose costs on third parties.

  True
• What is the effect of buying an electric car on air quality for the local community?

  Reduces pollution
• Match the type of consumption externality with its example:

  Positive ↔️ Vaccination

  Negative ↔️ Loud music at night
• What harm does smoking in public cause as a negative consumption externality?

  Exposes others to secondhand smoke
• What is an example of a positive production externality?

  A factory providing job training
• Production externalities can be either positive or negative.

  True
• How does a factory providing job training benefit the local community?

  Improves employability
• Match the type of production externality with its effect:

  Positive ↔️ Improved local employment

  Negative ↔️ Environmental degradation
• What harm does pollution from a manufacturing plant cause to the environment?

  Damages air and water quality
• Externalities affect third parties who are not directly involved in the transaction


  True
• Externalities can arise from both consumption and production activities.
• What is the definition of a positive externality?

  Benefits to third parties
• What is an example of a negative externality in production?

  Pollution from factories
• What is an example of a positive consumption externality?

  Buying an electric car