Question 2 (Consumption externalities)

a) Provide an example of a negative consumption externality. Describe the private and social marginal benefits associated with this consumption externality and what the marginal damage would represent.

b) Similar to the paper mill example graphical illustration seen in class, illustrate in a graph the inefficiency of competition associated with your negative consumption externality.

c) Choose a law designed to curb that negative consumption externality. Explain the externality the law is designed to reduce and discuss its effectiveness.