6. After reading the news clips below, your friend, Emily argues that masks are a private good, so government should not subsidize the production." A mask production subsidy scheme will open for applications starting today as the government says it will buy masks from each producer using a formula based on their costs instead of a uniform price. The Local Mask Production Subsidy Scheme under the HK$30 billion anti-epidemic fund aims to facilitate production as soon as possible to help address the local shortage. ..... Each applicant may be granted a subsidy of up to HK$3 million for setting up its first production line, while an additional subsidy of up to HK$2 million may be given for its second production line.

Source: The Standard, Mar 2, 2020 As a student who learned this course, you disagree with Emily and respond to her by answering two following questions.

a. (4 marks) Are masks are a private or public good?

b. (10 marks) Apply the externality concept and use a relevant graph to explain why the government needs to subsidy the production of masks.

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After reading another piece of news (see below), Emily says that this is an example of "a tragedy of the commons". Discarded face masks are piling up on Hong Kong's beaches and nature trails, with environmental groups warning that the waste is posing a huge threat to marine life and wildlife habitats. Source: Reuters, Mar 12, 2020

c. (9 marks) Discuss what Emily said and why it is correct. Use a relevant graph to enrich the discussion.

d. (2 marks) Can you propose a measures to solve the problem of hiking trails and beaches littered with surgical masks?