ECON 1000 D - Assg 2

ECON 1000 D - Assg 2 - Assignment #2 ECON 1000 D, Professor...

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1 Assignment #2 ECON 1000 D, Professor Vivek Dehejia DUE DATE: In tutorial , November 11 th , 2010 Answer ALL questions. Students who submit an assignment to more than one tutorial section will receive a ZERO. Submitted work should be completed independently and written in your own words . Question 1 (10 points): Consider the market for steel. (a) Why might the market for steel exhibit negative externalities? (1 point) (b) Given that steel production has negative externalities, draw a graph of the market for steel, properly labelling all relevant curves . You may assume that steel is measured in tonnes. (2 points) (c) Identify the market equilibrium level of output. Identify the efficient level of output. Do these quantities differ? If so, why? (4 points) (d) Supposing that the external cost of steel production is $25 per tonne of steal, what policy can the government pursue to internalize the externality ? Explain with the help of your diagram in (b). (3 points) Question 2 (10 points):
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This note was uploaded on 11/25/2010 for the course SYSC 44509 taught by Professor Mattdamomn during the Fall '10 term at Carleton CA.

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ECON 1000 D - Assg 2 - Assignment #2 ECON 1000 D, Professor...

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