1. Give an example of positive externality. Without intervention, do society over-produce or under produce? Show with a graph. Identify dead-weight loss in your graph.

2. Define and explain the difference between the terms "nonrival" and "nonexclusive." Which of these properties is likely to result in a free-rider problem?

3. Should government intervene with tax or subsidy in the presence of externality? Why or why not?

4. Can obesity epidemic be regarded as a negative externality? Explain