Reference no: EM131038473

1 -Compare and contrast Pareto optimality and Pareto superiority and provide a brief discussion of the advantages of the Pareto criteria in assessing the public interest.

2 -Suppose that a particular policy would result in a $100 gain for Gwen but a $20 loss for Sabrina. Everyone else in the economy remains the same. Is this policy change in the public interest according to the potential compensation criterion? Explain and justify your answer.

3 - Define property rights. Give an example of a property right in action. Are property rights absolute? If they are situations where they are not, using your previous example, give a situation where that property right might not be absolute.

4 - The Coase Theorem implies that transactions costs are important in whether or not the initial assignment of property rights matters for economic efficiency. Describe what is meant by transactions costs and how transactions costs tend to vary as the size of groups increase.

5 - A regional airport decides to extend a runway, increasing the amount of noise pollution on nearby homes. Assume that an optimal corrective tax can be applied. Should that tax be paid as compensation to the nearby homeowners? How might compensating the homeowners change their (and potentially others) incentives?

6 - Define a collective consumption good and why private production of collective consumption goods will be inefficient and might justify government intervention.

7 - Suppose that a factory is located on the outskirts of a small town. As a by-product of its production process, it produces sulfur dioxide that gets released into the air. The sulfur dioxide lowers the quality of the in the town. Suggest some possible remedies for this negative externality.