A positive externality or spillover benefit occurs when?

Economics Dec 17, 2020

Expert Solution

A positive externality or spillover benefit occurs when those outside a trade receive benefits they don't pay for. These individuals are known in economics as free riders and they are the reason some services or goods are provided by taxation to the public. Hiring a police officer to patrol your neighborhood means that your home is safer, but so are the homes of all your neighbors and that is why it is paid for in city taxes and provided as a public good.

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