Question

Josiah installed a metal sculpture in his front yard. A positive externality arises if the sculpture a. creates a safety hazard for neighborhood children. b. increases the value of Josiah's home. c. increases the value of other properties in the neighborhood. d. is visually unappealing to Josiah's neighbors.

Answer 1

Answer: C. increases the value of other properties in the neighborhood.

Explanation:

A positive externality occurs when the action of an economic agent brings about a benefit to others who aren't involved in the action.

In this case, the positive externality with regards to Josiah installing a metal sculpture in his front yard will be the increase in the value of other properties in the neighborhood.

Option A is incorrect as the creation of a safety hazard for neighborhood children is a negative externality. Option B is wrong as Josiah enjoyed the benefit and not a third party. Option D is a negative externality. Therefore, the correct option is C.