Solution 2 - ECON/FRE 374 Problem Set 2 Due: 4pm, Friday...

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Due: 4pm, Friday October 7 2005 Instructions: a) Your grade on this problem set will be determined by randomly grading a single problem from the set below. It is thus important to do each question carefully as any one problem could determine your grade. b) Problem sets are to be handed in at the beginning of class. Please do not upload your problem sets in WEBCT. c) Any problem set received after the time it is due will not be graded. d) Please label and mark all graphs clearly. Questions (each question is worth a potential 10 points): 1) Read the “Fish Tale” article from “The Economist” a) Explain how externalities as a concept apply to this article b) Identify other externality issues related to overfishing c) List some possible solutions to this overfishing problem d) Under what conditions can these alternative solutions be made effective e) Search and submit a short article showing an externalities problem (other than fisheries). Discuss the problems and suggest how these could be addressed using concepts we discussed in class. 2) Climate change and refrigerator industry The ozone layer is threatened by a number of industrial chemicals, including CFCs (chlorofluorocarbons), which are used as coolants in refrigerators and air conditioners and HCFCs (hydrogenated CFCs), which are used as a CFC substitute, since they are much less damaging to the ozone layer than CFCs. (Environment Canada) Given the (hypothetical) market for refrigerators as P = 500 - 2Q MPC = 300 + 6Q where P is the price in dollars Q is the total quantity of refrigerators demanded MPC is marginal production cost
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Solution 2 - ECON/FRE 374 Problem Set 2 Due: 4pm, Friday...

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