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AP® Microeconomics

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Farms and Flood Prevention

APMICR-LIT1VL

Farmer Joe builds a levee to alleviate flooding on his property. Farmer Jane’s property, which is located next to Farmer Joe’s, also experiences flooding.

Farmer Joe’s levee may create a positive externality if

A

it also lessens flooding on Farmer Jane’s property.

B

Farmer Jane compensates him for the cost of building the levee.

C

it increases the value of his property.

D

he has to consume no resources to construct the levee.

E

Farmer Jane pays Farmer Joe to build a levee on her property.