Question

‘Shifting to electrical vehicles will reduce emissions of greenhouse gases.’ This statement is an example of:

• A. Negative Production Externality
• B. Positive Production Externality
• C. Negative Consumption Externality
• D. Positive Consumption Externality

Hint:

Production externalities arise from producers’ actions—positive ones create benefits, like reduced pollution from electric vehicles.

Answer 1

The Correct Option is B

The shift to electric vehicles is an example of a positive production externality because it involves a production decision (using cleaner technology) that has beneficial side effects, such as reduced greenhouse gas emissions, which benefit society without being directly reflected in market prices.