Econ 101 Winter 2010 Problem Set 11

Econ 101 Winter - Economics 101 Microeconomics Problem Set 11 April 1 2 University of Michigan Winter 2010 Econ 101.400 Winter 2010 Question One In

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Problem Set 11 April 1 & 2 University of Michigan Winter 2010 Economics 101 Microeconomics
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Econ 101.400 Winter 2010 Question One In Smalltown, California, one hundred families have their lives and property threatened every year by brushfires. The risks of brushfire can be significantly reduced by controlled burning in the spring. The value each resident family places on controlled burning is implied by the marginal value function: MV = 200 – Q, where Q is the number of acres of surrounding brush that are razed. The cost of the controlled burn is $500/acre. (a) If the brush-burning was efficient, how many acres would be burnt? (b) If the families of Smalltown were encouraged to contribute to a fund that would pay for the controlled burn, do you imagine they would generate enough revenue to undertake the efficient quantity of burning? (c) Suppose the Smalltown government promised to undertake the controlled brush burning. Not knowing how many acres to burn, they propose the following scheme. Each of the Smalltown residents will be asked how many acres she
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This note was uploaded on 04/20/2010 for the course ECON 101 taught by Professor Gerson during the Winter '08 term at University of Michigan.

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Econ 101 Winter - Economics 101 Microeconomics Problem Set 11 April 1 2 University of Michigan Winter 2010 Econ 101.400 Winter 2010 Question One In

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