Suppose that there are 300 residents affected by a local source of pollution each with a...
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Suppose that there are 300 residents affected by a local source of pollution each with a marginal willingness to pay given by MWTP, = 100-10q, where q is the level of a unit of air quality improvement. Suppose that a unit of air quality improvement costs $9,000. a. (1 mark) Find the social MWTP function for improvement in air quality. b. (3 marks) Draw MWTP,, total MWTP and marginal cost curves on a diagram. c. (1 mark) What is the efficient amount of air quality improvement? d. (2 marks) Is there a market failure here? Explain. e. (5 marks) How does the Coase theorem provide a solution to this particular problem? Explain. f. (2 marks) Why might it be hard to reach a solution in part (e)? What is the implication of this? Suppose that there are 300 residents affected by a local source of pollution each with a marginal willingness to pay given by MWTP, = 100-10q, where q is the level of a unit of air quality improvement. Suppose that a unit of air quality improvement costs $9,000. a. (1 mark) Find the social MWTP function for improvement in air quality. b. (3 marks) Draw MWTP,, total MWTP and marginal cost curves on a diagram. c. (1 mark) What is the efficient amount of air quality improvement? d. (2 marks) Is there a market failure here? Explain. e. (5 marks) How does the Coase theorem provide a solution to this particular problem? Explain. f. (2 marks) Why might it be hard to reach a solution in part (e)? What is the implication of this?
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a The social marginal willingness to pay SMWTP function for improvement in air quality is given by t... View the full answer
Related Book For
Statistics Data Analysis and Decision Modeling
ISBN: 978-0132744287
5th edition
Authors: James R. Evans
Posted Date:
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