A beekeeper's bees pollinate the fruit trees of a neighbouring farmer, and the farmer gets a bigger crop. The farmer pays nothing to the beekeeper for this. This is an example of:
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → a positive externality
An externality is a benefit or harm one person causes another without being paid or penalised. The bees benefit the farmer, and the beekeeper gets nothing, so it is a positive externality.
Option (1) a negative externality — Incorrect. A negative externality is a harm, like a refinery polluting a river. Here there is a benefit.
Option (2) a transfer payment — Incorrect. A transfer payment is a payment of money. No payment is made here.
Option (3) a barter exchange — Incorrect. Barter is a two-way exchange of goods. The farmer gives nothing in return.
Option (4) a positive externality — Correct. The farmer gains and does not pay for it.
NCERT (2026-27): “2.5 GDP and Welfare … 3. Externalities: Externalities refer to the benefits (or harms) a firm or an individual causes to another for which they are not paid (or penalised). Externalities do not have any market in which they can be bought and sold. …” “2.5 GDP and Welfare … This was an example of negative externality. There can be cases of positive externalities as well. In such cases, GDP will underestimate the actual welfare of the economy.” |