Question

flat downward-doping O downward sloping horizontal O horizontal: upward-sloping upward-sloping flat Question 16 072 Monopolists will earn the most proſt by producing where total revenue is highest het cost in the last totaltarthatot Question 17 2/2p When does price discrim nation take place?
#16

#22

#26

Answer 1

26. To answer this question let's first understand the concept of externality.

Externality is said to exist when a third party outside the transaction gets affected by the transaction made between two parties. The affect on the third party can be both positive or negative. When the affect of transaction on third party is negative, say in case of pollution where a factory is emitting pollution and households outside transaction are getting affected negatively, then we say there is negative externality. And when the affect on the third party is positive, say in case where a neighbour decides to have a garden and the other neighbour outside this transaction gets positively affected by the presence of garden outside his house, then we say there is positive externality due to the transaction.

Now we can easily answer this question.

A positive externality arises when a third party, outside the transaction, benefits from the market transaction.

So the correct option is, option third. Benefits from the market transaction.

I hope I was able to help you, thank you.