EXTERNALITIES: REGULATION An airport lies in a small city. Near the airport 1,000 families live, each of whom suffers equally from noise measured by a private marginal cost PMC} = 000000136 Q [SfdecibelL where Q is the total noise {decibels}. {1) Is airport noise a public or private good in consumption and in production? {2) What does the "private marginal cost of noise" mean? What does the "social marginal cost of noise" mean? {3] 0n Curve Sheet B draw the social marginal cost schedule associated with airport noise. Airplanes can reduce their noise by flying slower and incurring extra costs. There are two types of airplane, Airbus and Boeing. If an Airbus produces 0A noise, its private marginal benet from producing extra noise is PMBA = 10 .01 QA (sidecibell. If a Boeing produces QB noise, its private marginal benefit of extra noise is PMBB = 20 .02 QB {Sidecibel}. Both of these Private Marginal Benefit Schedules are drawn on the attached Curve Sheet A {4) What does the "private marginal benet of producing noise" mean? {5) For which aircraft is noise control relatively cheap? 4 airplanes of each type use the airport each day. (6) What does the "social marginal benefit of producing noise" mean? (7) On Curve Sheet A draw the social marginal benefit schedule for noise production. (8) What is the efficient level of noise production? (9) Without any resident organization, what level of noise do you predict? Why do you think the residents fail to get the noise reduced? The local council responds to citizens demand and orders all aircraft to reduce their noise level by 45%. (10) What is the consequent level of noise? What resources are spent on noise reduction? (11) Is the consequent outcome efficient?Instead of regulating noise level, the local council proposes to tax noise. (12)What tax will lead to the efficient noise level? What tax is paid? (13) What resources are spent on noise reduction? Is it less than under regulation?20 S/decibel 18 16 14 12 10 1050 20 2050_ S/decibel 18 Irbes noise, 16 14 12 10 8 1000 2000 -Boeing noise,B- SOCIAL MARGINAL BENEFITS AND COSTS 22 20 S/decibel 18 16 14 12 10 1000 2000 3000 4000 5000 6000 7000 8000 9000 -noise (decibels)