5. Why are spillover costs and spillover benefits also called negative and positive externalities? Show graphically how

Question:

5. Why are spillover costs and spillover benefits also called negative and positive externalities? Show graphically how a tax can correct for a negative externality and how a subsidy to producers can correct for a positive externality. How does a subsidy to consumers differ from a subsidy to producers in correcting for a positive externality? LO4.4

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