Problems for Chapter 28

1. According to the World View on p. 568, how much worse (percentage-wise) is the pollution in the city of Guiyang, China, compared to New York City?

2. In some states, mining for coal leaves large mounds of rubble, which poses flooding problems, causes land damage, and is unsightly. The following table shows the estimated annual social benefits and costs of restoring various amounts of such land:

Land restored (in acres) / 0 / 100 / 200 / 300 / 400 / 500
Social benefits of restoring land / 0 / $300 / $600 / $700 / $750 / $775
Social costs of restoring land / 0 / $800 / $1100 / $1500 / $2000 / $2700

a) Compute the marginal social benefits and the marginal social costs for each restoration level.

Land restored (in acres) / 0 / 100 / 200 / 300 / 400 / 500
Social Marginal benefit of restoring land
Social Marginal cost of restoring land

b) What is the optimal rate of restoration?

3. Suppose three firms confront the following costs for pollution control:

Total Costs of Control

______

Emissions Reduction (tons per year) Firm A Firm B Firm C

______

1 $200 $120 $160

2 $350 $250 $400

3 $550 $390 $650

4 $800 $590 $950

a) If each firm reduces emissions by 1 ton, how much will be spent?

b) If the firms can trade pollution rights, what would be the cheapest way of attaining a net 3 –ton reduction?

c) How much would a pollution permit trade for?

4. For the question above, suppose the goal is to reduce pollution by 9 tons.

a) If each firm must reduce emissions by 3 tons, how much will be spent?

b) If the firms can trade pollution rights, what would be the cheapest way of attaining a net 9 –ton reduction?

c) How much would a pollution permit trade for?

5. The accompanying table shows Flora’s and Francesca’s individual marginal benefit of different amounts of street cleanings per month. Suppose the marginal cost of street cleaning is constant at $10 each.

Quantity of street cleanings per month / Flora’s Marginal Benefit / Francesca’s Marginal Benefit
0 / - / -
1 / $11 / $9
2 / 7 / 7
3 / 5 / 4
4 / 2 / 1

a) If Flora had to pay for street cleaning on her own, how many street cleanings would there be?

b) Calculate the marginal social benefit of street cleaning. What is the optimal number of street cleanings.

c) Consider the optimal number of street cleanings. The last street cleaning of that number costs $10. Is Flora willing to pay for that on her own? Is Francesca willing to pay for that on her own?