Question

5. A livestock farm currently emits 20,000 gallons of toxic chemicals into a nearby river. The following table shows the total costs (TC) in dollars of cleaning up the toxic chemicals to different levels, together with the total benefits (TB) in dollars of doing so.

Sewage level	TC	MC	TB	MB
20,000	0	N/A	0	N/A
15,000	5,000		50,000
10,000	15,000		95,000
5,000	30,000		130,000
0	50,000		160,000

a. Using the information in the table calculate the marginal costs (MC) and marginal benefits (MB) of reducing sewage emissions for this city.

b. What is the optimal level of toxic sewage emissions for this farm?

2. Identify whether the market supply curve will shift right, shift left, or stay the same (choose one for each of a through d).

a. An automobile manufacturer is not required to pay a fine for cheating on its emissions testing.

b. A shipping company is sued for damages after it causes an oil spill.

c. Corporate farms using dangerous chemical fertilizers are forced to clean up local waterways.

d. City officials are aware that a manufacturing firm releases illegal levels of carbon emissions, but they take no action.

10. A U.S. treasury bond is something offered by the federal government in the United States. Think about a treasury bond in the context of rival/non-rival and excludable/nonexcludable. With that in mind, is a U.S. treasury bond classified as a "private good" or "public good" in the United States?

11. Suppose that by living in the United States, you inherently benefit from the overall strength of the U.S. dollar in foreign currency markets. Is your benefit rival or non-rival? Is it excludable or nonexcludable? Briefly explain why

Answer 1

Q5) table

Sewage level	MC	MB
20,000	-	-
15,000	5000	50,000
10,000	10,000	45,000
5000	15,000	35,000
0	20,000	30,000

B) since at all sewage levels,

MB > MC

Thus Optimal level : zero sewage

Bcoz when zero level, MB-MC is Minimum, so profit is Maximum

2)

a) supply Curve shifts right

b) supply Curve shifts left

c) as Production cost rises, so supply Curve shifts left

d) supply Curve stays same, as no penalty action is undertaken.

.

Its Mandatory to Answer only first Ques