1. The text says that both non-rival and non-excludable public goods involve externalities.

Question

a. Are the externalities associated with nor-rival public goods generally positive or
negative? Use examples in your answer. Is the free-market quantity of nor-rival public
goods generally greater or less than the efficient quantity?
b. Are the externalities associated with non-excludable generally positive or negative?
Use examples in your answer. Is the free-market use of non-excludable public goods
generally greater or less than the efficient use?
2. When the production of all goods and services is left to private markets, there is a
tendency to produce too much of some goods and insufficient amount of other goods. In
extreme cases certain goods will not be provided at all.
a. Clearly illustrate how does the policy of laissez faire cause markets to fail.
b. To what extent and how should the government intervene in the production of goods
and services?
c. In light of the Coase theorem, government intervention is probably not needed to solve