• What is a negative externality?
• Construct a graph for the market for Steel showing the market price and quantity when the firms are dumping their industrial waste in the local waterways.
• What is the motivation for firms to pollute the local waterways?
• Explain how third parties are adversely affected from the pollution and how the negative externality can be internalized.
• Draw into the graph the appropriate shift of the supply curve which will remedy the negative externality and bring about the socially optimal level of output.
• What is a positive externality?
• Construct a graph for the market for vaccine shots showing the market price and quantity.
• Explain how third parties are benefiting from those who consume vaccine shots and how the positive externality can be internalized.