Reference no: EM131379947
Directions: You should legibly handwrite or type the answers to the following questions on a separate sheet of paper. These must be submitted in class (not via email unless you have permission). Be sure to show your work.
1. (a) Give an example of a negative externality that was not used in class.
(b) Explain why the existence of a negative externality creates market failure.
(c) Illustrate the market failure caused by the negative externality using a graph of supply and demand.
(d) Name and explain one way in which this negative externality can be corrected without government assistance.
(e) Name and explain one way in which this negative externality can be corrected by the government.
2. (a) Give an example of a positive externality that was not used in class.
(b) Explain why the existence of a positive externality creates market failure.
(c) Illustrate the market failure caused by the positive externality using a graph of supply and demand.
(d) Name and explain one way in which this positive externality can be corrected without government assistance.
(e) Name and explain one way in which this positive externality can be corrected by the government.
3. (a) Explain what a public good is.
(b) How will a public good result in market failure?
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