Externalities seem to be everywhere! Little wonder that you probably won’t get through a micro exam paper without bringing externalities into your analysis and evaluative discussion! There is a lot to cover so start your revision early on this topic! You will need to be able to illustrate external costs and external benefits using marginal analysis, and then distinguish between the market and social optimum positions. Showing the welfare loss or gain areas are required as you analyse the effects of externalities from both production and consumption. One key evaluation point to remember – not all externalities are that important – but many are which is why this is a favoured topic for examiners.