Step 2: Read the following passage, which continues from the college economics textbook Foundations of Microeconomics.

1     Negative consumption externalities are a source of irritation for most of us. Smoking tobacco in a confined space creates fumes that many people find unpleasant and that pose a health risk. So smoking in restaurants and on airplanes generates a negative externality. To avoid this negative externality, many restaurants and all airlines ban smoking. But while a smoking ban avoids a negative consumption externality for most people, it imposes a negative consumption externality on smokers. The majority, for whom the ban is in place, impose a cost on the minority-the smokers who would prefer to enjoy the consumption of tobacco while dining or taking a plane trip.

2     Noisy parties and outdoor rock concerts are other examples of negative consumption externalities. And they are also examples of the fact that a simple ban on an activity is not a solution. Banning noisy parties avoids the external cost on sleep-seeking neighbors, but it results in the sleepers imposing an external cost on the fun-seeking partygoers.

3     Permitting dandelions to grow in lawns, not picking up leaves in the fall, allowing a dog to bark loudly or to foul a neighbor's lawn, and letting your cell phone ring in class are other examples of negative consumption externalities.

4     When you get a flu vaccination, you lower your risk of being infected during the winter. But if you avoid the flu, your neighbor, who didn't get vaccinated, has a better chance of remaining healthy. Flu vaccinations generate positive consumption externalities.

5     When its owner restores a historic building, everyone who sees the building gets pleasure from it. Similarly, when someone erects a spectacular home-such as those built by Frank Lloyd Wright during the 1920s and 1930s-or other exciting building-such as the Chrysler and Empire State Buildings in New York or the Wrigley Building in Chicago-an external consumption benefit flows to everyone who has an opportunity to view it.

Fill in the blanks to complete the summary statements about the passage.

		6. Negative and positive are the costs and the benefits that are side effects of others' consumption.
		7. When the neighbors let their house and property become rundown, they are creating a for the rest of the neighborhood.
		8. Yet if a law were passed that said everyone must paint their houses every five years and mow their lawns every week of the summer, then that same neighbor would be the one to summer a .
		9. are generated when people benefit from others' consumption.
		10. One example of this type of externality is the benefit one gets from a neighbor's flue shot; another is the pleasure gained by everyone else when the owner of a historic building it.

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