Question

Give an example of a positive externality and an example of a negative externality.

Short answer

A positive externality example is vaccination, which not only protects the vaccinated person but also reduces disease spread, benefiting the community. A negative externality example is pollution from a factory that harms the ecosystem and affects people living nearby, imposing costs on them.

Step-by-step solution

Positive Externality Example

A common example of a positive externality is vaccination. When a person gets vaccinated, they not only protect themselves from illness but also protect the community by reducing the spread of disease. The individuals in the community who don't get sick due to other people's vaccination benefits from this positive externality.

Negative Externality Example

A common example of a negative externality is pollution from a factory. If a factory pollutes a river nearby, it may cause harm to the local ecosystem and the people living downstream who depend on the river for drinking water and other resources. In this case, the factory's action imposes costs on others, leading to a negative externality.