HW1c-Ch5&6_Xtns_Gruber3e

HW1c-Ch5&6_Xtns_Gruber3e -...

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Chapter 5:  1. Suppose your town wishes to build a dam to protect itself from the risk of flooding. Despite the fact that each family in the town is willing and able to pay $200 to have the dam built and it will cost only $150 per family, a voluntary contribution campaign is unable to acquire enough funds to build the dam. Why? What type of problem is this and what solution would you recommend? 2. People who live on small lakes sometimes have breakwalls constructed on their property by the shore. A breakwall is typically a vertical column of wood or concrete that prevents high water levels from covering part of the owner's property, reducing the size of the beach, and/or eroding the yard. However, several communities have restricted property owners from building breakwalls. Can you think of a reason why? Hint: Think about potential externalities of building a breakwall. 3. Suppose that the demand for a chemical is given by
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HW1c-Ch5&6_Xtns_Gruber3e -...

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