1. Give an example of a negative externality and an example of positive externality.

2. Define and give an example of a public good. Can the private market provide this good on its own? Explain.

3. Define and give an example of a common resource. Without government intervention, will people use this good too much or too little? Why?

4. A local drama company proposes a new neighborhood theater in San Francisco. Before approving the permit, the city planner completes a study of the theater's impact on the surrounding community. One finding of the study is that theaters attract traffic, which adversely affects the community. The city planner estimates that the cost to the community from the extra traffic is $5 per ticket. What kind of an externality is this? Why?