Question

Which of the following is not an externality?

Select one:

a.

Eating delicious cake causes weight gain

b.

Smoking cigarettes damages other people’s lungs.

c.

Staying at home reduces the spread of coronavirus.

d.

Using the internet heavily reduces the neighbors’ internet speed.

Answer 1

First we must know what an externality means,

​​​​​Externality refers to any activity of one individual or firm which have an impact either beneficial or non-beneficial on the others.

So, Externality is positive when it leads to a benefit for others and it's negative when it leads to a cost for others.

No let's see each option one by one

a. Eating delicious cake causes weight gain

As the impact of eating delicious cake by a person is on himself only and others are not affected. So it's not an externality.

b. Smoking cigarettes damages other people's lungs.

As we know smoking leads to an air pollution and will impact health of other people's and damage their lungs. So it's a negative externality.

c. Staying at home reduces coronavirus.

As we know coronavirus spreads through contacts as it forms a chain. So if we are at home we will reduce the chances of being a carrier and it impacts the society. Hence staying at home is a positive externality.

d. Using of internet heavily reduces neighbours internet speed.

As when we use internet heavily we are reducing the speed by increasing the traffic. So our neighbors are negatively impacted. So it's a negative externality.

Hence, From above discussion

Only Option a. Eating delicious cake causes weight gain is not an externality.

So, Option a. is correct