Which of the following best defines a positive externality?

A positive externality refers to the benefits that accrue to third parties who are not directly involved in an economic transaction. This occurs when an individual's or a firm's actions have beneficial effects on others, leading to outcomes that are advantageous but not compensated in the market. For example, an individual's decision to maintain a beautiful garden can enhance the aesthetic value of the neighborhood, benefiting neighbors and passersby who enjoy the scenery, even though they did not pay for it.

The correct answer highlights that positive externalities generate external benefits, which are valuable and can lead to increased overall welfare in the economy. These benefits might manifest in various forms, such as improved public health due to vaccination programs or enhanced educational outcomes from community tutoring programs, which positively affect individuals beyond the immediate participants.

In contrast, the other options do not capture the essence of a positive externality. Higher production costs suggest an increased burden on producers rather than benefits to others. Resource depletion speaks to negative externalities, where costs are imposed on third parties. Lastly, while market prices might be influenced as a result of external benefits, the defining characteristic of a positive externality is the generation of unforced advantages rather than merely changes in pricing dynamics.