HW 4q - AEM 250 Environmental and Resource Economics...

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AEM 250: Environmental and Resource Economics Homework 4 – Market Failure (Public Goods) Distributed: Feb 26, 2007; Due by beginning of class on Mar. 5, 2007 10 Points. 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. Suppose that Portage County Wisconsin’s ground water was contaminated with nitrates, and that two consumers (C1 and C2) live in this famed “sand county”. Below are their individual marginal willingness to pay functions (also known as marginal benefit functions) for a public de-nitrification plant where WTP indicates marginal willingness to pay for each additional unit of treatment and T indicates the level of treatment. Treatment is such that higher levels of treatment increase the purity of water. WTP C1 = 5 – ¼ * T WTP C2 = 5 – ½ * T a. Create a WTP (or marginal benefit) schedule for each consumer at the following treatment levels: 0, 2, 4, 6, 8, 10, 12, 14, 16, 18 and 20 in which the
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