AEM 2500 fall 2010 HW4 f - AEM 2500: Environmental and...

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AEM 2500: Environmental and Resource Economics, Homework 4 – Market Failure (Public Goods) Distributed: Sept. 27, 2010 Due in red box outside Warren 102 by 9:30 a.m., Oct. 4, 2010 10 Points. All graphs should be clearly labeled and all other work legible. If we are unable to interpret your work, you will receive a lower score. 1. (4 Points; Hint see gobbet 10) Suppose that Portage County Wisconsin’s ground water was contaminated with nitrates, and that two consumers (C1 and C2) live in this famed “sand county”. Below are their individual marginal willingness to pay functions (also known as marginal benefit functions) for a public de-nitrification plant where WTP indicates marginal willingness to pay for each additional unit of treatment and T indicates the level of treatment. Treatment is such that higher levels of treatment increase the purity of water. WTP C1 = 8 – ¼ * T WTP C2 = 8 – ½ * T a. Create a WTP (or marginal benefit) schedule for each consumer at the following treatment levels:
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AEM 2500 fall 2010 HW4 f - AEM 2500: Environmental and...

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