CSU BBA2501 micro unit 8 homework

| June 13, 2018

Unit 8 homework
1. Complete each of the following
a. Resources for which periodic use
can be continued indefinitely are known as ________
b. Resources that are available
only in a fixed amount are ____________
c. The possibility that a
open-access resource is used until the net marginal value of additional use
equals zero is known as the ___________________________-.
2) Why have authorities found it so
difficult to regulate the fishing catch in the open ocean to allow for a
sustainable yield?
3) Suppose you wish to reduce negative
externality by imposing a tax on the activity that creates that
externality. When the amount of the
externality produced per unit of output increases as output increases, the
correct tax can be determined by using a demand-supply diagram; show this. Assume that the marginal private cost curve
slopes upward.
4) Review the situation illustrated
in the graph above. If the government
sets the price of electricity at the socially optimal level, why is the net
gain equal to triangle abc, even though consumers now pay a higher price for
electricity? What would the net gain be
if the government set the price above the optimal level?
5) Use the data in the table below
to answer the following questions
a. What is the marginal external
cost of production?
b. What level is produced if there
is no regulation of the externality?
c. What level should be produced to
achieve economic efficiency?
d. Calculate the dollar value of
the net gain to society from correcting the externality

6) Think of an industry that
pollutes the water and has access to variable technology for reducing
pollution. Graphically illustrate and
explain the impact of each of the following, other things constant, on the
optimal level of water quality:
a. New evidence is discovered about
a greater risk of cancer from water pollution
b. The cost of pollution-control
equipment increases.
c. A technological improvement
reduces the cost of pollution control.
7) The following graph shows the
marker for pollution rights

$ per unit

P’ D S
.png”> S’
.png”> P



0 Q** Q* Q Quantity of discharge
If there are no restrictions on pollution, what
amount is discharged?
What is the quantity supplied and the quantity
demanded if the government restricts the amount of discharge to Q* but gives
the permits away?
Where is market equilibrium if the government
sells the permits? Illustrate this on
the graph.
What happens to market equilibrium if the
government reduces the amount of discharge permitted to Q**? Illustrate this on the graph
8) Four federal laws and subsequent amendments underpin U.S
environmental protection. Identify these
9) The value of a
home depends in part on how attractive other homes and yards in the
neighborhood are. How do local zoning
ordinances try to promote land uses that generate external benefits for

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