Most economies today are “mixed economies,” in which there is a both a public sector and a private sector. Explain the following two justifications for government intervention in the economy: public goods and externalities. What is the relationship between the availability of public goods and private goods? In so doing, consider the production possibilities schedule.

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A mixed economy is an economic system that combines the protection of both public and private property. However, the government can interfere with both sectors to achieve social goals. The private sector is allowed to have economic freedom in using capital. According to neoclassical economists, this economy is considered less efficient than pure free markets. Most economists argue that government interventions…