8. Oliver is obsessed with keeping his yard nice and clean. Which statement best illustrates the nature of the externality created by a well-maintained yard?
Answer: B
A well-maintained yard creates a positive externality by increasing the value of adjacent properties in the neighborhood.
A well-maintained yard contributes positively to the neighborhood by enhancing the aesthetic appeal and potentially increasing property values of nearby homes. This effect benefits not only Oliver but also his neighbors, as the clean and attractive environment can make the area more desirable.
A) A well-maintained yard creates a negative externality by increasing property taxes for Oliver
This option is incorrect as it mischaracterizes the nature of externalities. A well-maintained yard does not inherently lead to increased property taxes; instead, it can enhance community value. Negative externalities typically arise from actions that impose costs on others, which is not the case here.
B) A well-maintained yard creates a positive externality by increasing the value of adjacent properties in the neighborhood
This statement accurately reflects the concept of positive externalities. A well-maintained yard can raise the property values of nearby homes, as it improves the overall look of the neighborhood and attracts potential buyers, thus benefiting others in the vicinity.
C) A well-maintained yard creates a positive externality by increasing the market value of Oliver’s house
While it is true that a well-maintained yard can increase the market value of Oliver’s house, this option focuses solely on his property rather than considering the broader impact on the neighborhood. The core idea of externalities is about the effects on others, making this option less relevant.
D) A well-maintained yard cannot provide any type of externality
This option is incorrect because it dismisses the possibility of externalities entirely. A well-maintained yard can indeed create positive externalities that benefit the community, contradicting the assertion that it cannot provide any external effects.
Conclusion
The correct answer highlights the positive externality of a well-maintained yard, which enhances the value of adjacent properties in the neighborhood. Other options either misinterpret the nature of externalities or fail to recognize the broader community benefits that arise from maintaining an attractive yard. Thus, option B is the only statement that accurately captures the essence of the externality created by Oliver's actions.