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practice_final_2 - Econ M134 UCLA Winter 2008 Prof Kahn...

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Econ M134 Name:_______________________ UCLA Winter 2008 Prof. Kahn SID#:___________________ Midterm Exam This is a 70 point, 75 minute exam. Plan to allocate one minute for each point. Please write your name and UCLA ID on your exam. Longer is not better, keep your answers brief and to the point. Read the entire question , and be sure to follow the directions. I. Short Answer 1. (10 points) Externalities and Social Cost -- There is a city where 100 identical people live. There is a power plant nearby that produces 1 unit of pollution. Assume that every location within the city experiences the same level of pollution from the plant. Discuss in 4 sentences or less an empirical strategy for measuring how much damage each person suffers from the ambient pollution. What data would need to be collected? 2. (10 points) Calculating Social Costs -- In the city with 100 identical people described above, now assume that the power plant’s pollution causes each person in the city to suffer 3 days of sickness. Each person values not being sick at $40 per day. Now assume there is a pollution scrubber that will reduce the plants pollution levels to 0. What is the maximum aggregate amount that the city’s residents would be willing to pay the plant to install the scrubber.
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3. Measuring Sustainability -- Use the following two graphs of different ESI indicators to answer the following questions. The unit of analysis is a nation. Carbon Dioxide emissions are measured per person. Real GDP stands for Real Per-Capita Gross Domestic Product.
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