If a homeowner uses wood to heat his house,
◦ he may generate an external cost if the smoke bothers his neighbours.
◦ the price of the wood represents an external cost to the homeowner.
◦ he may generate an external benefit if the smoke bothers his neighbours.
◦ the price of the wood represents an external cost to the homeowner, unless he harvests the wood himself.
◦ he may generate an external benefit if the price of heating oil goes down in his region.