Which of the following is an example of a positive externality?Group of answer choicesSue not catching the flu because she got a flu vaccineMary not catching the flu from Sue because Sue got a flu vaccineSue catching the flu because she did not get a flu vaccineMary catching the flu from Sue because Sue did not get a flu vaccine
Question
Which of the following is an example of a positive externality?Group of answer choicesSue not catching the flu because she got a flu vaccineMary not catching the flu from Sue because Sue got a flu vaccineSue catching the flu because she did not get a flu vaccineMary catching the flu from Sue because Sue did not get a flu vaccine
Solution
The example of a positive externality from the given choices is "Mary not catching the flu from Sue because Sue got a flu vaccine".
Here's why:
An externality is a cost or benefit that affects a party who did not choose to incur that cost or benefit.
A positive externality is a benefit that is enjoyed by a third-party as a result of an economic transaction. In this case, Sue getting a flu vaccine is the economic transaction.
Mary, who is a third-party, benefits from this transaction because she does not catch the flu from Sue. This is a positive externality because Mary did not choose to incur this benefit (she did not get the vaccine herself), but she benefits from Sue's decision to get the vaccine.
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