1.When an economy and government face negative externality, describe the cause of this problem and what are some solutions?Name at least three possible methods of correction.

2.When an economy and government face positive externality, describe the cause of this problem and what are some solutions?Name at least three possible methods of correction.

3.Review the graph below for a refrigerator company and answer the following questions.

a.In terms of externalities, what is the resource problem facing this society?

b.Based on the Private Production decision quantity, how much is being overallocated or underallocated?

c.Providing a specific amount, how could the government correct this inequality?

950 sodal S private 900 850 800 750 Price ($) (40,000,700) E 700 650 E. (45,000,650) 600 D 550 10,000 30,000 50,000 70,000 RefrigeratorsPrice Quantity Demanded Private Quantity Quantity Supplied Supplied After Paying the Cost of the Pollution $10 450 400 250 $15 440 440 290 $20 430 480 330 $25 420 520 370 30 410 560 410