Externalties

1. Externalities are third party consequence of some other action. They can be positive or negative externalities and they impose a benefit or cost to a third party. Identify a positive and a negative externality. Discuss the benefits and costs associated with each type of externality. What happens to the Supply and/or Demand curve in each of your examples?

2. Economies of scale is a concept that says as firms get larger, they become more efficient and their costs of production decrease. This being the case, why don't firms continue to get infinitely larger? Use at least 2 examples, including graphs, in your response.