Answer to the no: 1 a) There are some impact of external costs and external benefits on resource allocation such as, formerly discussing about the impact of external costs and benefits on resource allocation, we must be familiar with the concept of resource allocation. ‘Resource allocation is the distribution of resources – usually financial - among competing groups of people or programs.’ (Henry J. Kaiser Family Foundation, 2004).

However allocating the resources, it is very important to access the external costs and external benefits. In other words, ‘external benefits and external costs are also called externalities. Externalities can be said as the cost or benefit imposed on people other than the consumers and producers of a goods and services. It can be either negative or positive for the third party. For an instance, rock music listeners may disturb their neighbors while they listen to it in a loud speaker. It is the negative externality for the neighbors.’ Moreover, people passing by the beautiful garden may enjoy the gardening of the house owner. In this case, it is the positive externality for the people passing by.’ (Allan Layton Tim Robinson Irvin B. Tucker, 2007).

Consequently, the external costs and the external benefits play remarkable role in allocating the resources. As resource allocation is the should be logically done, that process must carefully and logically analyze the ways affects of externalities. Not only has that, the externalities provided the meaningful pictures that help to determine the amount of resources to be allocated in different sectors for the best economic activities.

b) The reasons behind the insufficient production of public goods by the private sectors.
Public goods are those whose consumption is not decided by the individual consumer but by the society as a whole, and which is financed by taxation.’ (Web Finance, 2011). For an instance, human rights, civil laws, economic statistics, parks, roads, etc. are some fundamental public goods. Those goods are made and allow to be used by the local council or the government to the public for their welfare. All the costs associated to establish the public offices also incur those goods. Hence, people neither pay to consume nor block others to enjoy the benefits of goods that are publicly available.

‘Private sectors are the distinct part of the national economy made up of private enterprises which includes personal sectors (households) and corporate sector (companies) and is responsible for allocating most of the resources within an economy.’ (Web Finance, 2011). Private sectors are highly motivated to earn maximum profit. They cannot survive in the economy without making the remarkable profit. Hence, private sectors do not keep significant interest in the production of the public goods rather they produce those goods which are highly profitable.

c) S.no. | Goods | Public Goods | 1. | The Judicial System | Yes | | 2. | Pencils | | No | 3. | The quarantine service | Yes | | 4. | The Great Wall Of China | Yes | | 5. | Contact lenses | | No |

1.There is no exclusivity and rivalry to use it and everyone can use it as everyone is subject to the law. 2.These are purchased on an individual need basis, if you don’t pay you don’t use therefore there is no exclusivity and rivalry to purchase what is available from a limited supply provided by the market. 3.Producers and consumers benefit from this system and member of these group cannot be excluded from benefiting from these services. 4.Assuming that consumer cannot be excluded. You can not have total exclusion from this good.Even if you cannot walk on it you can still find photos of it and read about it. 5.These are purchased on an individual needs basis, if you don’t pay you don’t use therefore there is exclusivity and rivalry to purchase from what is available from a limited supply provided in the current