Question: 1. Explain when a negative externality exists. 2. Explain when a positive externality exists. 3. Explain how marginal social costs are calculated. 4. Explain how

1. Explain when a negative externality exists.
2. Explain when a positive externality exists.
3. Explain how marginal social costs are calculated.
4. Explain how marginal social benefits are calculated.
5. Describe the socially optimal output.
6. Graphically show the net social cost of moving from the socially optimal output to the market output in the case of a good with a negative externality.
7. Graphically show the net social cost of moving from the socially optimal output to the market output in the case of a good with a positive externality.

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