Question

what are positive externalities?

Answer 1

An externality is the effect that an activity has on an unrelated third party who had no part in the activity. A positive externality would be one that benefits that unrelated third party. One example I was taught in class was immunization. The person receiving a flu vaccine is benefiting from not being harmed by the virus. As a consequence of getting vaccinated, there's now one less person able to spread the flu. Everyone else around him is also benefiting from this because the chances of them getting the virus is lowered, even if they don't realize it.