Market Failure and Externalities Assignment (copy)

In this assignment, you will explore how markets can sometimes fail to produce efficient outcomes. You will also learn about externalities—costs or benefits that affect third parties—and consider ways to address these issues, including the potential role of government intervention. Answer the following questions thoughtfully and in your own words.

Explain how a market can sometimes fail to produce an efficient outcome. Provide an example to support your explanation.

Define externalities. Then, explain the difference between a positive externality and a negative externality, giving an example of each.

Describe at least two possible methods to remedy externalities. In your answer, include a discussion of the potential role for government in addressing externalities.