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Rick is a good hearted although crusty character operating the Cafe American restaurant/bar on the northern coast of Africa during the second world war. It
Rick is a good hearted although crusty character operating the Cafe American restaurant/bar on the northern coast of Africa during the second world war. It is his (and other business people's) habit to dump their garbage into the Mediterranean Sea, As time goes by (this is a hint), the war ends, business improves and the amount of garbage going into the sea increases. You go back in time and say to Rick, "If you don't stop dumping garbage into the sea you're going to regret it - maybe not now, but soon, and for a very long time". Rick is baffled. He serves good food, has a good piano player and a Swedish girlfriend. Rick is a pillar of his community and was even something of a local war hero. Assume Rick is making a small LRE profit and that he has many competitors including "The Blue Parrot". a) Referring to the file labelled FNLXMSA Graphs, which panel shows Rick's ATC, MC, MR & Demand curves. Tell him which panel and form of organization he is likely facing and why you think so. (4 points) b) Define the notion of an externality for Rick and provide a "real world" example of a positive externality so that he can understand your point. (2 points) c) Which of the graphs in FNLXMSA Graphs show the impact of an externality from the perspective of the social cost of pollution. (2 points) d) List and explain two mechanisms discussed in class or in the text that might solve the problem of cleaning up the Mediterranean Sea. (2 points) Bonus: For one bonus mark, what is the name of the movie (one of my all time favourites) to which this question refers (hint - won the best picture Oscar in 1944). If you can tell me the name of either the lead actor or actress I will give you another bonus point
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