ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Positive externalities and public goods are closely related concepts. Public goods have positive externalities, like police protection or public health funding. Not all goods and services with positive externalities, however, are public goods.

Detailed explanation-2: -The problem with goods with externalities is that private market transactions do not produce efficient amounts of these goods. Private market transactions will lead to overproduction of goods with negative externalities and underproduction of goods with positive externalities.

Detailed explanation-3: -Externalities occur when one person’s actions affect another person’s well-being and the relevant costs and benefits are not reflected in market prices. A positive externality arises when my neighbors benefit from my cleaning up my yard.

Detailed explanation-4: -The externalities associated with common resources are negative because the goods consume by one decrease the quantity for others. The action of one hurt the other, for example, Fishing, forest. The free-market quantity of public goods generally less than the efficient quantity.