Chapter 16, Problem 15AA

To determine

To ascertain: the negative and positive externality would have of having an airport nearby home.

Explanation of Solution

The primary cause of externalities is badly defined rights to property. The ambiguous ownership of certain things can create a situation when some market agents start consuming or producing more while an unrelated party covers or receives a portion of the cost or benefit.

According to a report, living near an airport could increase your risk of dying from stroke, cardiac disease and circulatory disease. Those exposed to high aircraft noise levels are up to a fifth more likely to require hospital treatment for, or die from, such illnesses. Apart from its negative effect it also can have its advantages of living nearby airport as people can save transportation cost and also can get employment opportunities.

Economics Concept Introduction

Introduction: An externality is a loss or benefit generated by a producer not incurred or earned financially by that producer. An externality can be either positive or negative, and can arise from either a good or a service's output or consumption.