1) Explain graphically the collective demand curve for the particular public good and describe this curve.
2) Describe why the supply curve for the public goods is upward sloping and illustrate how the optimal quantity of the public good is calculated.
3) Recognize the aim of cost-benefit analysis and describe the main difficulty in applying this analysis.
4) Describe what is meant by the spillovers or the externalities.
5) Explain how an over allocation of the resources results when the spillover costs are present graphically and verbally and how this may be corrected by the action of the government.
6) Explain how an under allocation of the resources takes place when the spillover advantages are present graphically and verbally and how this may be corrected by the action of the government.
7) Describe the Coase theorem, its importance, and the 3 conditions essential for it to work.
8) Explain 3 policies which would decrease negative externalities.