Which of the following is an example of a positive externality?

• A. Vaccination reduces illness in the community.
• B. Factory emissions degrade air quality.
• C. A private cost increasing with output.
• D. A firm charging a monopoly price.

Answer: (A)

Positive externalities occur when an activity creates benefits that spill over to others beyond the direct participant, without those others paying for them. Vaccination is a classic example: when a person gets vaccinated, they’re less likely to contract or spread disease, which reduces illness in the whole community. People who are unvaccinated or vulnerable still benefit from lower chances of exposure, so the social benefits exceed the private benefits to the individual. Because markets price only private benefits, vaccination may be underprovided unless the government helps boost uptake through subsidies, public clinics, or mandates.

The other options illustrate different ideas: factory emissions harming air quality are a negative externality, a private cost increasing with output is a private cost rather than a spillover to others, and a firm charging a monopoly price concerns market power, not external effects on third parties.