Question

Match each of the following characteristics or scenarios with either the term negative externality or the term positive externality. a. Overallocation of resources: . b. Tammy installs a very nice front garden, raising the property values of all the other houses on her block: . c. Market demand curves are too far to the left (too low): . d. Underallocation of resources: . e. Water pollution from a factory forces neighbors to buy water purifiers: .

Answer 1

Answer: a. Negative externality  

b.Positive externality  

c.Positive externality  

d.Positive externality  

e.Negative externality

Explanation:

Positive externatility are the advantages which the people enjoy apart from the marketplace for which they do not pay any money. Negative externality means negative consequences faced by the people outside due to the activities of the firm.

A.In the scenarios given above when resource are over allocated the public resources are depleted and creates negative externality  .

B. Tammy's case by raising garden increases the value of the public property which is positive externality.

C.Market demand is low so prices are low it is positive externality..

D.When resource are under allocated the public resources are not depleted and creates positive externality  .

E. Water pollution affects public and creates negative externality  . .