How would you derive the demand for milk at the local grocery store? How would you derive the demand for tuna? How would you derive the demand for national defense? Explain why an externality might be a market failure. What does market failure mean? Use the accompanying table to answer the following questions.
a. What is the external cost per unit of output? b. What level of output will be produced? c. What level of output should be produced to achieve economic efficiency? d. What is the value to society of correcting the externality?
