"Which of these is a positive externality? After measles vaccinations increase by 20%, the number of cases of measles falls by 35%. After a large stadium is built in a neighborhood, homeowner property values in the neighborhood fall because of noise and traffic. After the price of dental care decreases, more people can afford regular dental check-ups. Researchers develop a new drug that effectively treats a terminal disease that previously had no cure.

"Which of these is a positive externality? After measles vaccinations increase by 20%, the number of cases of measles falls by 35%. After a large stadium is built in a neighborhood, homeowner property values in the neighborhood fall because of noise and traffic. After the price of dental care decreases, more people can afford regular dental check-ups. Researchers develop a new drug that effectively treats a terminal disease that previously had no cure.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

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.

Question

Which of these is a positive externality?
After measles vaccinations increase by 20%, the number of cases of measles falls by 35%.
After a large stadium is built in a neighborhood, homeowner property values in the neighborhood fall because of noise
and traffic.
After the price of dental care decreases, more people can afford regular dental check-ups.
Researchers develop a new drug that effectively treats a terminal disease that previously had no cure.

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