Private, social and external costs and benefits, Microeconomics

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Question:

(a) Using an example, differentiate between private, social and external costs and benefits.

(b) With the use of a diagram, describe the difference between profit maximizing level of output and socially desirable level of output in the
presence of negative externality.

(c) Describe and determine the methods that the public and private sectors attempt to deal with negative externalities.

(d) Using appropriate examples, differentiate between merit and public goods.


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