Externality

I think that the best example of externality is option 2, right? 1) Smoking results in a positive consumption externality because children and adults around are harmed by the smokers second hand smoke. 2) Deciding not to pay for health insurance means that society bears much of that persons healthcare burden. Deciding not to buy health insurance results in a negative consumption externality. 3) As a part of the space program’s mission it undertook research and development that spawned lots of new innovation in products and services for many businesses. This is an example of a positive consumption externality.