Tut4 - Economics 290: Canadian Microeconomic Policy...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 290: Canadian Microeconomic Policy Tutorial #4 (Week of June 4) 1. Bill G. bought a piece of land and plans to build an airport for personal use. His benefit from each flight per day is given by MB = 400. His marginal cost is MPC = 20F, where F is number of flights per day. Unfortunately, the airport will be located next to Adam’s house, and the sound of each flight brings him a negative utility (in monetary equivalent) of 100. (a) What is Bill’s preferred amount of flights if the government does not regulate? (b) Adam has complained to the state government, and the government has decided to set a fixed number of flights per day that are allowed to land at the airport. What should that number be? (c) Suppose the government decided to give property rights over flight landings to Adam. How many flights would Adam allow? Explain your answer. (d) Continue from part (c), what is the maximum amount Bill is willing to pay to increase the number of flights from zero to the number in part (c)? What is the
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/12/2009 for the course ECON 290 taught by Professor J liu during the Fall '06 term at Simon Fraser.

Ask a homework question - tutors are online