show all your work for the problems requiring calculations.

1.A.Define externality

B.Give an example of both a positive and a negative externality.

2.Define the following:

a.Marginal private cost

b.Marginal external cost

c.Marginal social cost

3.If the marginal private cost of producing one unit of X is 73 cents and the marginal social cost is 90 cents, what is the marginal external cost?

4.Explain the three methods governments use to cope with negative externalities.

5.According to Arthur Pigou, if an external cost is present, for Pigovian taxes to be effective in achieving the efficient allocation of resources, what should the tax be set equal to?

MSC - S Cost and price (in dollars] 5 MSB MB = D 25 50 75 100 Quantity (units]MSC 250 200 Price (dollars per ton of paper) 150 MC 100 50 D - MSB 0 50 100 150 200 250 300 Quantity (tons of paper per week)