What term describes a benefit to a third party from production or consumption?

• A. Negative Externality
• B. Social Cost
• C. Private Cost
• D. Positive Externality

Answer: (D)

Externalities are effects of production or consumption that spill over to people who aren’t directly involved. When those spillovers are beneficial to third parties, it’s called a positive externality.

Think of examples like education, which boosts society’s productivity, or a neighbor’s well-kept garden that raises nearby property values, or vaccination that helps prevent disease from spreading. In each case, someone benefits even though they weren’t part of the decision to produce or consume.

That’s why this term is the best fit: it specifically refers to a benefit experienced by others as a result of someone else’s activity. The other options describe different ideas: a negative externality is a cost imposed on others; social cost is the total cost to society (private plus external costs); private cost is the cost borne by the individual or firm involved.