All Terrain Thinking

A Compendium of things I think are Important

Economics: It's not just whats' in your wallet

Questions of the Day
Externalities and Public Goods

1. There has been much written over the years about the potential costs to the US of a dependence on imported oil, costs that are not adequately captured in the market price of oil. Please design at least two policies that could reduce the negative externalities where one is a market based approach and one can be a regulatory approach.

2. Please identify an externality that we have not discussed and design a policy to eliminate the externality.

3. Please design policies to make the dorms a little quieter. What would be the solution if you gave the 'property rights' to the makers of the noise? What if you gave the property rights to those studying who want quiet halls?

4. How do you explain the existence of pollution in a market society? Why is it that we cannot expect pollution to be dealt with effectively in a market system and what can we do to cure the problem?

5. In the outline section we examined the situation when Tammy's generated a negative externality. We found that the optimal level of output declined as once the social costs were internalized.  How would things differ if there were positive externalities - that students who were in the neighborhood of the tutoring sessions actually did better as a result of eavesdropping.  In fact, the value created by each hour of tutoring was $1.  What would be the new optimal level of output?

6. Explain why a lighthouse is a good example of a public good and why it is unlikely to be provided in adequate amount by the private sector.

7. There has been a considerable amount written about the plight of the African elephant that has been the target of ivory hunting poachers.  One of the solutions to the problem has been a ban on the ivory trade.   Please describe what you see as the potential problems with that solution and draw up a plan that will explicitly acknowledge the theory of the commons nature of the problem.

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