Why do externalities cause market failure? What types of government actions or regulations can be used to correct externalities? How do they work? What is an example of a negative externality and discuss how the government can fix it?

Use a supply and demand graph to show a good which should be illegal owing to it's negative externality.

Ricky, a retired railroad conductor and Lucy, a full time lab technician are next door neighbors in an apartment building. Ricky loves to play loud heavy metal music, which can be heard for hours during the evening.Lucy can't stand heavy metal, which often rattles the wall of her small apartment from the large speakers next door. A. What is the externality in the example above? B.  What command-and-control policies might the landlord impose? Could such policies lead to an inefficient outcome? C. If the landlord refuses to get involved in the despute. Based on the ideas associated with the Coase theorem, how might Ricky and Lucy reach an efficient outcome on their own? What might prevent them from reaching an efficient outcome?

Externalities Do you think that there would be external effects associated with Water from a uranium mine leaking into Kakadu National Park? If so, what would be the nature of the external effects? Can you think of policies that might deal with each external effect (that is, improve social wellbeing)?

Explain the role of the government is trying to provide a solution when an externality is present

Offer an example of a good or service with a negative externality. What is the externality of the good or service you mentioned?

Give an example of a positive externality and an example of a negative externality that exist in the economy? Share your thoughts in a paragraph

If the government subsidizes vaccination against influenza to internalize the externality, should it impose the subsidy on consumers or producers of flu vaccines? How large should the subsidy be? How much less per flu vaccine would patients (i.e., consumers) pay? How much more would manufacturers (i.e., producers) of flu vaccines receive?

Determine whether the actions below correct positive, negative externalities or neither: A. Correct positive externalities B. Correct negative externalities C. Correct neither 1. government control of the prices in the market 2. Subsidize production in the market ? ✓ 3. Increase the cost of production in the market ? ?

Why is a price change NOT an externality? Select one: a. A price change affects bystanders, not market participants. b. A price change does NOT change total costs or benefits, it only changes who buys the good. c. A change in price changes the marginal benefit of a good but does NOT change who buys and sells the good. d. A price change redistributes costs but not benefits.