1. The noise pollution coming from the block party next to your house is a negative externality that can be accurately measured. The table below shows the marginal social benefit and the marginal social cost per decibel (dB, a measure of volume) of music.
   1. Draw the marginal social benefit curve and the marginal social cost curve. Use your diagram to determine the socially optimal volume of music (use Fig. 2 from the lesson to help you get started).
   2. Only the attendees of the block party benefit from the music, and they bear none of the cost. Which volume of music will they choose?
      1. Since the attendees of the block party do no bear any of the social costs of playing loud music, they will choose the volume of 96.5 dB.
   3. The police are called in because of complaints from surrounding homeowners. They impose a Pigovian tax of $3 per decibel for any music volume played over 90 decibels. From your diagram, determine the volume of music the block party attendees will now choose.
2. If you get the H1N1 Flu vaccine, not only are your chances of getting sick reduced, but you being healthy also benefits the people you interact with on a daily basis.
   1. Draw a graph showing the market for H1N1 flu shots. Assume that the marginal cost of each H1N1 flu shot is constant and is equal to the marginal social cost and that the demand curve is downward sloping (use Fig. 1 to help you get started).
   2. Will the marginal social benefit curve be higher, lower, or the same as the demand curve? Why? Draw the marginal social benefit curve into your diagram.
   3. In your diagram, show the market equilibrium quantity and the socially optimal quantity of flu shots. Is the market equilibrium quantity of flu shots socially efficient? Why or why not?
   4. Many university health centers offer free flu shots to students and employees. Does this solution necessarily achieve efficiency? Using your diagram, explain your answer.

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