Please use own language!

1. Externalities and Public Goods A. Define positive and negative externalities, and provide an example of each. (8 points) B. What makes something a public good? (4 points) How are externalities involved in public goods? (4 points) C. Give an example of a public good that the government provides. Explain why the provision of this good is not left to the free market. (8 points) 2. Income Distribution and Taxes A. Draw a Lorenz curve. (5 points) What does this curve represent? (2 points) B. Why are taxes needed? (3 points) Explain the different criteria for deciding whether or not a tax is fair. (4 points) C. What is regressive taxation? (3 points) Make a positive and a normative statement against a regressive tax. Be clear about which statement is positive and which is normative. (4 points)