Consider the market for face masks.

a) Why might face masks exhibit positive externalities? Draw a graph of the market for face masks, labelling the demand curve, the social benefit curve, and the supply curve.

b) Indicate the market equilibrium level of output and the efficient level of output. Give a reasonable explanation as to why these quantities differ.

c) If the external benefit is 3 per face mask, describe a government policy that will yield an efficient outcome.

d) Briefly explain whether you agree or disagree with the following statement: "Carbon emissions from cars cause breathing difficulties for people with respiratory illnesses. The total benefit to society is greatest when we completely eliminate the carbon emissions."