1. The general equilibrium analysis offers a framework in which equilibrium is determined in all markets at once, rather than in one market while holding constant all other markets. The following are reasons why a general equilibrium analysis is required to study the full effects of changes in the economic environment of buyers or sellers on the price of a good.

-The equilibrium price of the good under study depends on the equilibrium prices of the inputs used in producing it.

-The equilibrium price of the good under study depends on the equilibrium prices of goods that buyers may regard as substitutes.

-The equilibrium price of the good under study depends on the equilibrium prices of goods that buyers may regard as complements.

-If the good under study is an input in the production of other goods, then its equilibrium price also depends on the equilibrium prices of goods it contributes to produce.

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2. How do you define the concept of an external effect or externality? define.

3. In general, other things constant, if the production or supply of a good imposes a negative externality on the rest of society (a cost not reflected in the price that buyers pay in the market), then

- the good in question will be overproduced and overconsumed.

- the good in question will be underproduced and underconsumed.

- the good in question will be overproduced and underconsumed.

- the good in question will be underproduced and overconsumed.

4. In general, other things constant, if the production or supply of a good imposes a positive externality on the rest of society (a benefit not reflected in the price that buyers pay in the market), then

-the good in question will be underproduced and underconsumed.

-the good in question will be overproduced and overconsumed.

-the good in question will be overproduced and underconsumed.

-the good in question will be underproduced and overconsumed.

5. According to economists, what is a rivalrous good? Explain your answer.

6. According to economists, what is an excludable good? Explain your answer.

7. If there is a public good (both nonrivalrous and very costly to exclude), how do you think society should manage to provide this good (produce it, deliver it to consumers or users, and consume) at a level near its optimal level? Explain your answer.