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study guide for final exam

study guide for final exam - Chapter 1 to Chapter 9 See the...

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Chapter 1 to Chapter 9 See the study guides for previous chapters. Chapter 10 1. What is externality? What is negative externality and what is positive externality? What is the effect of an externality on economic efficiency? 2. When we have a negative externality, what is the relationship between the market equilibrium quantity and the social optimal quantity? What is the relationship between private costs and social costs? 3. When we have a positive externality, what is the relationship between the market equilibrium quantity and the social optimal quantity? What is the relationship between private values and social values? 4. What are the private solutions for the externality problem? 5. What is the Coase Theorem? 6. Can you give a concrete example on how contracting between private parties can solve the externality problem? 7. When private solutions will fail? 8. What are the two main public methods to solve the externality problem?
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