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1. (50 Points) In the presence of externalities, markets can lead to inefficient outcomes. In Chapte we discussed several private and public responses which will
1. (50 Points) In the presence of externalities, markets can lead to inefficient outcomes. In Chapte we discussed several private and public responses which will help individuals and governments avoid externality problems. Name these private and public responses and briefly discuss each one. 2. (25 Points) Graphically illustrate the case where government intervention "Crowds Out" the private education and explain your graph. Do not forget to label everything appropriately. 3. (25 Points) Consider two projects. The first project pays benefits of $1000 today and nothing else. The second project pays nothing today, but $1090 one years from now. a. Which project would be preferred if the discount rate were 0%? b. What if the rate increased to 10%? TIME: 1. (50 Points) In the presence of externalities, markets can lead to inefficient outcomes. In Chapte we discussed several private and public responses which will help individuals and governments avoid externality problems. Name these private and public responses and briefly discuss each one. 2. (25 Points) Graphically illustrate the case where government intervention "Crowds Out" the private education and explain your graph. Do not forget to label everything appropriately. 3. (25 Points) Consider two projects. The first project pays benefits of $1000 today and nothing else. The second project pays nothing today, but $1090 one years from now. a. Which project would be preferred if the discount rate were 0%? b. What if the rate increased to 10%? TIME
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