which of the following is most likely to generate an externality? a) taxes that are collected to pay for public schools? b) a newlywed couply buys a tv for their family room c) teachers at a local high school have pizza delivered every friday for lunch   can you tell me which is correct? and explain why please. I understand the concept of an externality but for some reason i got this question wrong.

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Market Failure Analysis

To understand Market failure, we need to first understand welfare economics. An Italian economist, Vilfredo Pareto stated that allocation of resources in an efficient manner such that an economic change, which harms no one and makes someone better off, indicates an increase in social welfare. It is also called Pareto Optimality, where resources cannot further be reallocated without harming one. This does not apply to those economic changes, which harm some and benefit others. social welfare increases if the utility of any of its members' increases and none decrease in the economy.