Public finances

1. Consider the case of two firms in a market for three goods, s steel, f fish, and x pollution. If company 1 produces (s,x), and company 2 produces (f), if the cost functions are given by the functions Cs(s,x) and Cf(f,x) respectively for company 1 and 2 , and considering that cf x > 0 and cs x 0, determine a Pigouvian-type tax on good x.

2.A little over two years ago, the Government of Mexico City, concerned about the well-being of its population and faced with a situation of surplus public finances and without problems of infrastructure or public services, organized a free public concert with Carlos Santana in the angel of Independence, was a great show, even for the installation of the mega stage it was necessary to close the circulation for automobiles the central lanes of Av. Paseo de la Reforma from Friday to Sunday. To the rhythm of Black magic woman, Europe, and Samba Pa ti, the attendees enjoyed the show offered. Including me.

a) Is the concert offered really free?

b) Was the public concert with Carlos Santana a private good?

c) Did the concert generate any type of externality?

Justify your three answers.

3.Given the growing environmental pollution that Mexico City suffers, it has been decided to establish an economic regulation based on the establishment of restrictions on the emission of sulfur into the atmosphere. Suppose there are five companies that exist in the market. The regulatory standard establishes that the total annual emission in the city will be 2,000 tons of sulfur. The cost of investment in anti-pollution equipment to reduce 20 tons of sulfur is 10 million pesos (the investment cannot be divided due to the type of equipment. What option would you propose for the regulation to be successful and will it generate the correct economic incentives?

Justify your answer

The following table shows the current levels of contamination.

Business	Current pollution (yearly tons of sulfur)	Capital available for investment (millions of pesos)
1	500	30
2	600	25
3	400	20
4	400	20
5	300	20
Total	2200

4. If the economy functions under conditions of competition and economic efficiency, State intervention in the economy would be justified. True or false?

5. Using indifference curves determine the conditions of efficient provision of a public good in the market