This chapter focuses on externalities in the context of producing goods and services, but these ideas are very applicable to our daily lives, as are many concepts in our course. Please include the following in this discussion:
Identify and describe a situation in which you encountered a positive or negative externality.
Clearly state the external cost or benefit.
Calculate the monetary value of the externality. You may be unsure how to proceed, so consider the following questions: What is the highest price you would be willing to pay for the external benefit you received if it is a positive externality? What is the lowest price you would be willing to accept as compensation for the external cost you are bearing if it is a negative externality?
How many people are affected by this externality in total? Based on the number of people affected, recommend a tax or subsidy amount that the externality creator should pay or receive (to “internalize the externality”). You might assume that everyone affected values the externality the same way you do.