1. Positive or Negative Externality
Madrid

2. Current Situation
A manufacturing plant pollutes a nearby river, much to the displeasure of the residents downstream. At a town meeting, residents discuss three proposals for solving the pollution problem. Pick the one you think is best and defend your answer.

3. Proposals
Since the downstream residents will receive the benefits of pollution control, they should pay for it. This is a clear case of external benefits or positive externalities. A property tax should be placed on the residents downstream to cover the cost of pollution control.
The government should force the plant to close. That is the only way to stop all the pollution. There is no reason for the downstream residents to suffer. Any other solution still leaves some dirty water.
The company is not counting all of its costs of production. Keeping the river clean should be one of these costs. A tax, called an effluent tax, should be placed on the company for each cubic foot of water it contaminates.

4. Football Team?
The National Football League (NFL) has awarded a new franchise for a football team to be established in Walnut, but only if the new team has a new arena in which to play.

5. Proponents
Proponents of the franchise argue that the team will generate new business, provide jobs, increase tax revenue and promote tourism in Walnut.

6. Opponents
Opponents argue that most of the money spent on basketball games will come from Walnut-area residents who will simply reduce their spending on other activities. Thus there will be few new jobs, little increase in tax revenue and few new tourists coming to Walnut. Others say the new stadium will cause property values to fall and create traffic, parking and noise problems

7. Voters have the following three proposals before them
No city money should be used in the construction of the arena.
The city should place a tax on each ticket sold to pay for the arena.
The city should build the arena and lease the right to play there to the basketball team at a subsidized rate.

8. Quiz Time:

9. Positive or Negative Externality
Private high School education
Smog from cars
Your neighbor’s yappy dog
Pre-kindergarden measles vaccinations