along the production possibility frontier. However, all countries should prefer to make a choice that shows

productive efficiency—that is, the choice is somewhere on the production possibility frontier rather than inside

it. Revisit Choice in a World of Scarcity for more on these terms.

Self-Check Questions

1. Identify the following situations as an example of a negative or a positive externality:

a. You are a birder (bird watcher), and your neighbor has put up several birdhouses in the yard as well as

planting trees and flowers that attract birds.

b. Your neighbor paints his house a hideous color.

c.

Investments in private education raise your country’s standard of living.

d. Trash dumped upstream flows downstream right past your home.

e. Your roommate is a smoker, but you are a nonsmoker.

2. Identify whether the market supply curve will shift right or left or will stay the same for the following:
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