The town of Chefsmeadow has 100 residents.Each resident has a car.Each car produces $30 worth of pollution per person.In other words, each person in the town breathes in $30 worth of air pollution harm from one person's car as that person drives around the town.Thus each car produces $3,000 worth of air pollution overall ($30 per person x 100 people = $3,000 total harm).Because there are 100 cars, the total dollar estimate of all the pollution harm caused by all the cars is $300,000.

There is a device called a "Polluteaway" that can be installed in a car and cuts its air pollution in half.The device costs $1,000 to buy and install.For the following questions, you can assume each person cares only about the air pollution they breathe and not that others have to breathe.

1.What is the dollar gain or loss to one individual (let's call him Fred) in buying and installing a Polluteaway in his car?Take into account both the gain in the cleaner air he breathes and what Fred has to pay.The answer will only be a number.Write net gain as a positive number and a net loss as a negative number

2.Given your answer to question 1 above, if no one else in the town has bought one, would Fred buy one?Answer "Yes" or "No".

3.If everyone else in the town has bought one, would Fred buy one? Answer "Yes" or "No"

No one in the town has one.There is a proposed deal that everyone in the town agrees to buy one if everyone else in the town also agrees to buy one.Everyone in the town has agreed to this deal so far except for Fred.

4.If Fred signs on and everyone buys one, what is the dollar value of cleaner air that Fred will get.Don't worry about the cost of buying it in answering this question, just tell me Fred's valuation of the benefit to him of the cleaner air he will get from everyone having one.Remember, the Polluteaway only gets rid of half the car's pollution.The answer will just be a number.

5.Now use your answer to question 4 above and your knowledge that the Polluteaway costs $1,000 to find the net value to Fred of signing this deal.Remember, a gain is a positive number and a loss is a negative number.The answer will just be a number.

6. So, should Fred sign the deal?Answer "Yes" or "No".

7.If Fred signed the deal, and no one could actually check if Fred had bought and installed the Polluteaway, should Fred keep the deal?Answer "Yes" or "No"

8. Explain why Fred should or should not keep the deal.

9.If the only source of air pollution in this town is their cars, the people would have totally clean air if they would ban cars from their town.Since clean air is good, is it obvious they should do this?Answer "Yes" or "No".

10.Explain your answer to question 9.