Consider two ways to protect your car from theft. The Club ( a steering wheel lock) makes it difficult for a car thief to take your car. Lojack (a tracking system) makes it easier for the police to catch the car theif who has stolen it.
1) Which causes a positive externality? (Lojack, Club, Neither, Both)
2) Which of the following needs to be subsidized? (Lojack, Club, Neither, Both)
3) Which of the following needs to be taxed? (Lojack, Club, Neither, Both)
4) Which causes a negative externality? (Lojack, Club, Neither, Both)