A positive externality is when a good or service is produced and used in a way that benefits a party that is not directly involved in the market transaction.
<h3>What are the reasons for the Market Failure?</h3>
Externalities, public goods, market regulation, and a lack of knowledge are all possible causes of market failure. Market failures can be resolved through government involvement, such as new legislation, taxes, tariffs, subsidies, or trade restrictions.
The complete question is shown in the file attached below:
Thus, providing free and reduced lunches to low-income students by the government is a situation of positive externality where no directly involved in the market transaction.
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