Externalities. Can government assignment and enforcement of property rights internalize an externality? Will this approach work as well as, better than, or worse than direct government intervention? Explain your answers and describe one of the difficulties associated with this solution.

Tax inefficiencies. The city of Hamiltown decides to build a new stadium to attract a basketball team from the city of Jacksondale. One economic advisor suggests that the stadium should be financed by a 2-year sales tax of 10%, while another advisor suggests that the stadium should be financed with a 20-year sales tax of 1%. Assume the interest rate is zero. Which approach will yield a more efficient outcome? Why?