Which of the below is the best example of a positive consumption externality? Smoking cigarettes negatively impacts those around you. Correct answer Deodorant makes you smell nice to other people. Using more electricity is bad for the environment. You Answered The production of smartphones leads to R&D the benefits other fields of study.
Question
Which of the below is the best example of a positive consumption externality? Smoking cigarettes negatively impacts those around you. Correct answer Deodorant makes you smell nice to other people. Using more electricity is bad for the environment. You Answered The production of smartphones leads to R&D the benefits other fields of study.
Solution
The best example of a positive consumption externality from the options provided is "Deodorant makes you smell nice to other people."
Here's why:
A positive consumption externality occurs when the consumption of a good or service by an individual has a positive effect on others. In this case, when a person uses deodorant, it not only benefits them (by making them smell nice) but also those around them who get to enjoy the pleasant smell. This is an external benefit that is not reflected in the market price of the deodorant.
On the other hand, the other options are not examples of positive consumption externalities:
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Smoking cigarettes negatively impacts those around you: This is a negative consumption externality because the consumption of cigarettes has a negative impact on others (through secondhand smoke).
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Using more electricity is bad for the environment: This is also a negative consumption externality because the consumption of electricity has a negative impact on the environment.
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The production of smartphones leads to R&D that benefits other fields of study: This is a positive production externality, not a consumption externality. It occurs when the production of a good or service (in this case, smartphones) has a positive effect on others (through the R&D that benefits other fields of study).
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