Question

which of the following correctly describes the external benefit resulting from an individuals purchase of a winter flu shot?
a. the flu shot reduces the likelihood you will miss work as the result of sickness; therefore, you will earn more income.
b. the income of doctors increases when you get the flu shot.
c. the flu shot is cheaper than the cost of treatment when you get the flu.
d. the flu shot reduces the likelihood others will catch the flu.

Explanation:

An external benefit is a positive impact on a third party not directly involved in a transaction.

• Option a is a private benefit to the person getting the shot, not external.
• Option b is a benefit to doctors (a direct service provider, not an unrelated third party from the external benefit definition).
• Option c is a private cost savings for the individual, not an external benefit.
• Option d describes a positive effect on others not involved in the flu shot purchase, which fits the definition of an external benefit.

Answer:

d. The flu shot reduces the likelihood others will catch the flu.