Which of the following is an example of a positive externality?

• A. A company dumps waste into a river, reducing water quality.
• B. A person smokes in a public area, affecting others' health.
• C. A homeowner plants a garden that beautifies the neighborhood.
• D. A factory emits pollution that harms nearby residents.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the concept of a positive externality. A positive externality occurs when an individual's or firm's actions result in benefits to others that are not reflected in market prices.
2. Step 2: Review each option and identify whether the externality is positive or negative. Negative externalities impose costs on others, while positive externalities provide benefits.
3. Step 3: Analyze the first option: 'A company dumps waste into a river, reducing water quality.' This causes harm to others, so it is a negative externality.
4. Step 4: Analyze the second option: 'A person smokes in a public area, affecting others' health.' This also imposes harm on others, so it is a negative externality.
5. Step 5: Analyze the third option: 'A homeowner plants a garden that beautifies the neighborhood.' This action benefits others by improving the environment and aesthetics, which is a positive externality.