AEM_250_homework_3_externalities_F2008

AEM_250_homework_3_externalities_F2008 - AEM 250:...

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AEM 250: Environmental and Resource Economics Homework 3 – Market Failure (Externalities) Distributed: Oct. 1, 2008, due in AEM 250 Red Box outside of Warren 104 by 9:30 A.M. on Oct. 10, 2008 (No late assignments will be accepted unless prior permission from Prof. Poe has been obtained. If you are having problems with some of the answers, you are advised to peruse the relevant gobbets on the course web site) 10 Points. Each question weighted equally. All graphs should be clearly labeled and all other work legible. If we are unable to interpret your work, you will receive a lower score. 1. (Adapted from Harris, Question 1, p. 61) Consider the following supply and demand schedule for steel: Assume that the above supply and demand curves are linear between points (and do not extend beyond the first (positive, positive) quadrant). Pollution from steel production is estimated to create an external cost of $60 per ton. There are no taxes in these initial conditions.
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AEM_250_homework_3_externalities_F2008 - AEM 250:...

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