EEHW1 - 1 Chapter 4 Efficiency& Markets 2 Suppose you...

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Eco 373: Environmental Economics Assignment 1 Due date July 21, 2011 Please answer all the questions showing all work to get full credit. All the best! Name(In Capital Letters): .............................................. ID : ...................................................... Chapter 3: Social Choice 1. Assume a city of 1 , 000 , 000 people 60% of whom are willing to pay $1 maximum (each) to clean up pollution. The rest of the population is better off and is willing to pay $100 each to clean up pollution. Pollution clean-up cots $2 ,000,000. It has been proposed that each person be taxed equally to pay for the pollution clean-up. a) Will that pass a majority-rule vote? (3 points) b) Is it desirable from the point of view of the Pareto criterion? (3 points) c) Is it a good idea, using the compensation principle? (3 points) d) Which social choice mechanism is best on intuitive grounds, and why? (3 points)
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Unformatted text preview: 1 Chapter 4: Efficiency & Markets 2. Suppose you know that Chateau Mull’s MRT of wine for garbage was 2:1 (it would require the cre-ation of 2 additional bags of garbage to produce 1 more bottle of wine) & Anna’s MRS of wine for garbage was 3:1 (she would take 3 more bags of trash to get 1 more bottle of wine). For this society would you recommend greater expenditures on garbage control, less expenditures, or the status quo? Explain your answer. (6 points) 3. Suppose an environmental regulation requires all polluters to reduce emissions by 50%, even though the cost of pollution control differs widely from one polluter to another. Why might this be inefficient, using the definition of efficiency that we discussed in class? (7 points) 2...
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