Which of the following is NOT an example of a permanent difference between private and social costs or benefits due to externalities?

• A. A neighbor planting a tree that provides shade to your property
• B. A beekeeper's bees pollinating nearby farmers' crops
• C. A factory emitting air pollution that affects nearby residents' health
• D. A temporary road closure that increases travel time for commuters

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the concept of externalities, which are costs or benefits that affect third parties who are not directly involved in a transaction. These can be positive (benefits) or negative (costs).
2. Step 2: Recognize that permanent differences between private and social costs or benefits occur when the externality has a lasting effect on others beyond the immediate transaction.
3. Step 3: Analyze each example to determine if the externality is permanent or temporary: the neighbor's tree, the beekeeper's pollination, and the factory's pollution all create ongoing effects that persist over time, thus representing permanent externalities.
4. Step 4: Identify that a temporary road closure causing increased travel time is a short-term event, meaning the external cost to commuters exists only during the closure and disappears afterward, making it a temporary externality.
5. Step 5: Conclude that the temporary road closure is NOT an example of a permanent difference between private and social costs or benefits due to externalities, unlike the other options which represent permanent external effects.