QUESTION 1

The text roughly outlines four categories of policies the government uses to mitigate negative externalities and protect the environment: Command and Control, Marketable Permits, Pollution Charges, and Defined Property Rights. Label each of the following potential government interventions by the policy categories listed above

1) Charging a coal-fired plant $23 per ton of carbon emitted.

a) pollution changes (pigouvian Taxes)

b) Marketable permits (cap and trade)

c) command and control

d) defined property rights

2) Provided permits to local manufacturing plants for 100,000 tons of CO2 and allowing them to buy and sell with each other.

a) pollution changes (pigouvian Taxes)

b) Marketable permits (cap and trade)

c) command and control

d) defined property rights

3) Providing legal property rights over a stream to a local fishery so they can pursue damages from a lab polluting the stream.

a) pollution changes (pigouvian Taxes)

b) Marketable permits (cap and trade)

c) command and control

d) defined property rights

4) Requiring all newly produced cars and light duty trucks to achieve 54.5 miles per gallon in 2025.

a) pollution changes (pigouvian Taxes)

b) Marketable permits (cap and trade)

c) command and control

d) defined property rights

QUESTION 2

Categorize each of the following five goods as a Private Good, Common Good, Club Good, or Public Good.Descriptions of each good will serve as hints.Remember,our textbook outlines only two types of goods, see the notes and lecture video for the other two types.

a) A KVCR radio signal - which is available to everyone with a radio, whether or not they contribute, the signal does not diminish no matter how many people tune in.

a) private good

b) common good

c) club good

d) public good

b) A new Ford truck - this can only be purchased by one person, you can not drive it off the lot without paying for it.

a) private good

b) common good

c) club good

d) public good

c) A subscription to Disney+ - you can not have a subscription without paying for it, purchasing a subscription does not lower the total number of subscriptions available.

a) private good

b) common good

c) club good

d) public good

d) A fireworks show on the 4th of July - the fireworks are visible to everyone in the town, whether or not they contributed anything to the display, one person viewing the fireworks does not make them less visible for anyone else.

a) private good

b) common good

c) club good

d) public good

e) A membership to 24 Hour Fitness - your membership does not reduce the number of memberships available, without paying your dues, you can not go into the gym

a) private good

b) common good

c) club good

d) public good

QUESTION 3

A secluded off-ramp on a highway through the Prairie of Prax has two gas stations, the only gas stations for miles, Northgoings and Southgoings.Suppose Northgoings and Southgoings must simultaneously display their prices, choosing between a high price and low price gas. The payoff matrix for this game, showing potential daily profit, is displayed below. Assume both stations know all of the information in the matrix, and that this is a one-time payoff.

Northgoings Decisions High Price Low Price N: $500 N: $800 High Price S: $400 S: $50 Southgoings Decisions N: $100 N: $250 Low Price S: $700 S: $200