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QUESTION 10 Soot is considered the second largest cause of global warming. It is emitted from a variety of sources, but most notably from vehicles. Damian owns a logistics company that has a very large fleet of diesel trucks. The Australian Government recently introduced legislation that charges companies based on the amount of emissions of their fleets that are above 5% soot. They can either opt to meet the 5% target and pay no permit cost (Process D), or purchase permits entitling them to pollute in excess of 5% (but this will also incur a cost to modify their fleet using Processes A, B, and C). Process A B C D Soot emissions (%) 10 8 6 5 Costs to modify Damian's fleet with Process ($ thousand) 0 100 700 1200 Permit cost ($ thousand) 1500 1100 300 Type T for True or F for False after every statement: a. Damian will implement process D. b. If Damian selects the process of least cost for him, the financial cost to society would be greater than if Damian implements process B C. The Government's decision not to completely ban the emission of soot indicates they do not believe a negative externality is associated with soot emissions.QUESTION 6 Sophie goes to the gym before classes at university. She wears her gym clothes to university after the gym as they are more comfortable. This annoys Joel. 1. Sophie wearing gym clothes is a negative externality for Joel. 2. Sophie wearing gym clothes does not produce any externality. 3. Sophie's decisions has no economic impacts on Joel. Which of the above statements are true: Only 1 is true. O Only 2 is true. Both 1 and 2 are true. Both 2 and 3 are true. All three are true. QUESTION 7 Brisbane Airport is currently constructing a second runway to increase its capacity. The runway construction cost will cost $1.3 billion. This increased capacity will have positive impacts on Queensland's tourism, the state and Australian economy. Which of the following statements are true: Brisbane Airport's decision to construct the runway creates a positive externality for hotel owners if they do not have to pay for the construction costs. Brisbane Airport's decision to construct the runway does not create any positive externalities. Brisbane Airport could use economic logic to justify receiving government funding to assist in building the second runway. Brisbane Airport could not justify receiving government funding as the airport itself is privately owned and operated.QUESTION 8 Megan is an architect. She designs a new apartment block that is built in West End. The building is praised by many, winning various awards. As a result, many people visit West End to see her building. Select the item from the list provided to make the following statements true. Marco owns a cafe across the road from the apartment block. The 1. Negative externality increase in customer numbers visiting the building and then 2. Positive externality Marco's cafe is an example of a 3. Tax 4. Subsidise Eloise lives next to the apartment block designed by Megan. The 5. Command and control building casts a large shadow on Eloise's property, killing her prized sunflowers. For Eloise the building has created a 6. Negotiate 7. Possible 8. Impossible Local councils often deal with issues associated with building 9. Private heights through setting maximum building heights for certain 10. Efficient suburbs. This is an example of the use of to deal with 11. Inefficient externalities. 12. Social QUESTION 9 Lachlan has a Jacaranda growing in his yard. One of the tree limbs is growing over into Dan's property. Dan does not like this and wants Lachlan to chop down the tree. Their respective benefits are shown below: Keeping Tree Chopping Down Tree Gains to Lachlan ($) 1000 500 Gains to Dan ($) 100 800 Total ($) 1100 What is the maximum amount that Dan would be willing to pay Lachlan to chop down the tree and still be better off by $1? Answer to the nearest whole number in dollars (with no decimal places, $ sign, spaces or commas)
