Follow the instructions below to answer the questions.
1. Voluntary environmental programs were extremely popular in the United States, Europe, and 4. The accompanying table shows six consumers' willingness to pay (their individual marginal Japan in the 1990s. Part of their popularity stems from the fact that these programs do not require benefit) to download a Jay-Z album. The marginal cost of making the file accessible to one legislative authority, which is often hard to obtain. The 33/50 program started by the additional consumer is constant, at zero. Environmental Protection Agency (EPA) is an example of such a program. With this program, Individual marginal benefit the EPA attempted to reduce industrial emissions of 17 toxic chemicals by providing information = on relatively inexpensive methods of pollution control. Companies were asked to voluntarily commit to reducing emissions from their 1988 levels by 33% by 1992 and by 50% by 1995. The program actually met its second target by 1994. a. Asin Figure 16-3, draw marginal benefit curves for pollution generated by two plants, A and B, in 1988. Assume that without government intervention, each plant emits the same amount of pollution, but that at all levels of pollution less than this amount, plant A's marginal benefit of polluting is less than that of plant B. Label the vertical axis \"Marginal benefit to individual polluter\" and the horizontal axis \"Quantity of pollution emissions.\" Mark the quantity of pollution each plant produces without government action. b. Do you expect the total quantity of pollution before the program was put in place to have B been less than or more than the optimal quantity of pollution? Why? a. What would be the efficient price to charge for a download of the file? . Suppose the plants whose marginal benefit curves you depicted in part a were b. All six consumers are able to download the file for free from a file-sharing service, participants in the 33/50 program. In a replica of your graph from part a, mark targeted Pantster. Which consumers will download the file? What will be the total consumer levels of pollution in 1995 for the two plants. Which plant was required to reduce surplus to those consumers? emissions more? Was this solution necessarily efficient? c. Pantster is shut down for copyright law infringement. In order to download the file, d. What kind of environmental policy does the 33/50 program most closely resemble? What consumers now have to pay $4.99 at a commercial music site. Which consumers will is the main shortcoming of such a policy? Compare it to two other types of environmental download the file? What will be the total consumer surplus to those consumers? How policies discussed in this chapter. much producer surplus accrues to the commercial music site? What is the total surplus? What is the deadweight loss from the new pricing policy 2. The city of Falls Church, Virginia, subsidizes the planting of trees in homeowners' front yards when the yards are within 15 feet of the street. a. Using concepts in the chapter, explain why a municipality would subsidize planting trees on private property, but near the street. b. Draw a diagram similar to Figure 16-4 that shows the marginal social benefit, the marginal social cost, and the optimal Pigouvian subsidy on planting trees. 5. Software has historically been an artificially scarce good it is nonrival because the cost of replication is negligible once the investment to write the code is made, but software companies make it excludable by charging for user licenses. But then open-source software emerged, most of which is free to download and can be modified and maintained by anyone. a. Discuss the free-rider problem that might exist in the development of open-source software. a. What effect might this have on quality? Why does this problem not exist for proprietary software, such as the products of a company like Microsoft or Adobe? b. Some argue that open-source software serves an unsatisfied market demand that proprietary software ignores. Draw a typical diagram that illustrates how proprietary software may be underproduced. Put the price and marginal cost of software on the vertical axis and the quantity of software on the horizontal axis. Draw a typical demand curve and a marginal cost curve (MC) that is always equal to zero. Assume that the software company charges a positive price, P, for the software. Label the equilibrium point and the efficient point. 3. The loud music coming from the sorority next to your dorm is a negative externality that can be directly quantified. The accompanying table shows the marginal social benefit and the marginal social cost per decibel (dB, a measure of volume) of music. sl Marginal social Marginal social 6. Aresidential community has 100 residents who are concerned about security. The music (dB) benefit of dB cost of dB accompanying table gives the total cost of hiring a 24-hour security service as well as each 90 individual resident's total benefit. $36 $0 91 Quantity of security guards Total cost Total individual benefit to each resident 30 2 92 0 s0 $0 24 4 93 1 150 10 18 6 94 2 300 16 12 8 95 3 450 18 6 10 96 4 600 19 0 12 97 a. Explain why the security service is a public good for the residents of the community. a. Draw the marginal social benefit curve and the marginal social cost curve. Use your b. Calculate the marginal cost, the individual marginal benefit for each resident, and the diagram to determine the socially optimal volume of music. marginal social benefit. b. Only the members of the sorority benefit from the music, and they bear none of the cost. c. If anindividual resident were to decide about hiring and paying for security guards on Which volume of music will they choose? their own, how many guards would that resident hire? c. The college imposes a Pigouvian tax of $3 per decibel of music played. From your d. If the residents act together, how many security guards will they hire? diagram, determine the volume of music the sorority will now choose
