Question

Identify whether each of the following is a positive or negative externality. Explain your answer. 1. Restoring the Amazon forest can reduce global levels of pollution. 2. Building a nuclear power plant near a housing development. 3. Expanding commuter train service into the suburbs. 4. US exports outdated computers to Nepal for disposal. 5. A city expands the number of public parks it provides to increase the number of trees it has.

Answer 1

Negative externality- A negative externality occurs when the production or consumption activity inflicts a adverse effect on the third party.

Positive externality: The positive externality occurs when the production or consumption activity inflicts a positive effect on the third party.

Ans:

1. This is certainly is a positive externality, restoring the forest can help to increase the oxygen level in the atmosphere as well as reducing the carbon dioxide. This will increase the quality of breathing for the people so they can live healthy, this is positive effect enjoyed by the third person.

2. Negative externality: The nuclear power plant at the residing area will negatively affect the health of the people , the radiation emitting from the nuclear plant can cause several diseases.

3. Negative externality: The e waste resulting from the disposal of the computers will contaminate the nature ,so there will be decrease in the quality of life.

4. Positive externality: This will give more fresh air to the public park which will increase the health of the people.