Answer to Question 1
The first reason why federalism might be desirable is because of economies of scale in production it might make sense to have some larger levels of government to produce goods that exhibit economies of scale. The second reason is coordination of large programs, for example, the coordination of highways between cities. The third reason is that the most efficient size to produce a public good might vary. The fourth reason is externalities might have effects across governmental jurisdictions, thus implying a role for government in dealing with the externality problem. The fifth reason is that depending upon the public sector output, there might be many different sizes of the optimal sharing group.
Answer to Question 2
a
