Write down a model of positive production externality with two firms, in which the production activities of one firm directly affects the production/cost of the other firm. State and explain the key assumptions of the model. Using the model, answer the following questions: (a) Explain why the presence of a positive production externality could prevent the realisation of an efficient outcome. (b) Name a possible cure for the positive production externality and explain how it could solve the inefficiency problem.

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