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Firm XYZ is considering an investment into a “clean technology” that will allow it to produce its products while releasing less pollution into the air. The firm is not required to invest in the clean technology, but the owner resides in the area and thereby receives private benefits from the cleaner environment. In turn, the cleaner technology also generates external benefits on other residents who live nearby. Suppose the marginal private benefits of the clean technology are MPB=330–0.9Q, the marginal external benefits are MEB=56–0.2Q, and the marginal cost is MSC=50+0.5Q, where Q is the level of investment in clean technology. Answer the following questions, illustrating your work graphically and in words.
a. Find the unrestricted market level of clean technology (Q) expended firm XYZ.
b. Find the socially efficient level of Q.
c. Find the social loss associated with the externality.
d. Explain how a subsidy can be used to achieve the efficient level of Q. Calculate the subsidy.

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Assume that firm 1 and firm 2 emit pollutants into the environment during their production processes. The government sets a total abatement standard of 20 units, and the firms’ abatement cost functions are:

Total Abatement Cost Firm 1: TAC1 = 10 + 0.75(A1)2
Marginal Abatement Cost Firm 1: MAC1 = 1.5(A1)

Total Abatement Cost Firm 1: TAC2 = 5 + 0.5(A2)2
Marginal Abatement Cost Firm 1: MAC2 = A2

a. What information does the government need to determine that the 20-unit abatement standard is efficient? Explain.
b. Suppose the government allocated the abatement levels equally such that each firm must abate 10 units of pollution. Show graphically, explain, and calculate the costs associated with this uniform standard.
c. Now assume that the government institutes an emission fee of $16 per unit of pollution. How many units of pollution will each polluter abate? From a social standpoint, is the $16 fee a cost-minimizing strategy for meeting the 20-unit standard? Explain.
d. If instead the government used a marketable pollution permit system, what permit price would achieve a cost-minimizing allocation of abatement? Compare the abatement costs from this outcome to the uniform standard in part (b).

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Tim, a candy maker, and Yang, the doctor are located next door to one another. The production of candy imposes an externality on the doctor. Specifically, Tim’s candy production creates noise that disturbs Dr. Yang’s practice. Below is a graph showing the marginal private cost and the marginal social cost of producing candy. Suppose that the market price for Tim’s candy is $5 per pound.  And assume that Tim has been given the property right to make noise.



a. What are Tim’s gains, Yang’s losses, and social gain if no attempt is made to internalize the externality?
b. Suppose Tim and Yang reach an agreement. Yang agrees to pay Tim a bribe of ½B + D, and in return, Tim agrees to reduce his candy production from QE to QO. What are Tim’s gains, Yang’s losses, and the social gain if both abide by the agreement? Who is made better off--Tim, Yang, or both?
c. Suppose Tim reneges on his agreement with Yang. Yang pays Tim the bribe, but Tim does not reduce the level of his candy production. What are Tim’s gains, Yang’s losses, and social gain in this situation? Who is made better off--Tim, Yang, or both?
d. Suppose instead that Yang reneges on the agreement. Tim reduces the level of his candy production to QO, but Yang does not pay him the bribe. What are the gains to Tim, Yang’s losses, and the social gains in this situation? Who is made better off?
e. Suppose that the agreement in part (b) is unenforceable and that either party can renege on the agreement without repercussions. In this case, there are four possible outcomes--both abide by the agreement, only Tim abides by the agreement, only Yang abides by the agreement, or both abide by the agreement. Use your answers in parts a-d to determine Tim’s gains and Yang’s losses, and summarize your answers in the table below. (prisoner's dilemma type table)

If each person acts in his own self-interest, will Tim and Yang choose to abide by or renege on the agreement? Explain.
f. What limitation of the Coase Theorem is illustrated by the result in part e?

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Mattawan County is considering selling a piece of county land to developers who plan to build residential housing. The land is located on one of the county’s last undeveloped mesas with panoramic views of a lake and inland mountains. The mesa is especially popular among hikers, and it also provides habitats for several species of plants and animals. The housing development will destroy both the recreation and habitat uses of the land. The county hires you to assess the relative benefits and costs of developing the mesa.
a. Your first task is to use a travel-cost method to assess the value of the mesa among hikers. To do so, you design and implement an onsite survey of 500 hikers. Briefly describe the types of information you must gather in your survey.
b. From the survey data you estimate the following relation between travel cost to the mesa and the yearly number of hiking trips per person:

Travel Cost Price = 100 - 4H, where H is the number of yearly hikes (i.e., trips)

You also estimate that the sample of hikers takes an average of 10 hikes per year.  What is the consumer surplus for the average visitor?
c. Describe the problems associated with this travel-cost method that could bias your estimates of the mesa’s value.
d. One of your colleagues criticizes your approach because it ignores indirect uses of the mesa, such as its existence value or ecological value. In response, you decide to implement a contingent valuation (CV) study to measure these nonuse values.  Describe the general method of contingent valuation to county policy makers. In particular, explain why you used the CV method in this case, and explain some potential problems with the CV method?
e. You gathered estimates of the value to the undeveloped mesa. Now you must use these measures to calculate the net benefits of allowing residential development on the mesa. Describe the items that you include in the benefits and costs of developing the mesa.
f. To calculate your net benefits, you must discount future net benefits into present value terms. Explain to county policy makers how and why you do this. What justification do you give for the discount rate that you chose? Explain.

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now, i'm not looking for/expecting somebody to give me all the answers, nor do i really need help on a lot of the explanations or whatnot; more just want to make sure i'm setting up the equations correctly, thus getting a proper graph, and then showing (on the graph) what the different areas represent - what is the consumer surplus, what is the extra social cost due to an externality, etc...

anyway, i know this is a bit of a stretch to ask, but if anybody feels like helping me verify my answers, or has any good links to similar problems with solutions, i'd really appreciate it.

thanks y'all