# tity of the publićby someone else, the generator of thean intimate connection, and in fact some redundancy, between the concepts of public11. It is costly to supply one more unit of a public good, but it is costless to provide theproducer should receive a positive price (for a good) but the consumer should pay abad and externality.on marginal cost pricing, thepublic good to an additional consumer. Thus, relyingprice of zero. As a consequence, budgets do not balance. A similar thing occurs withfobrobgn bocpublic bads.bopezcq ou qenho1. Consider an air basin with only two consumers, Huck and Matilda. Suppose Huck'sdemand for air quality is given by a- 1-p where p is Huck's marginal willingnessto pay for air quality. Similarly, Matilda's demand is given by qM 2 -2p. Air qualitycan be supplied according to q p where p is the marginal cost of supply.Graph the aggregate demand for air quality along with individual demandsWhat is the efficient amount of air quality?а.plub.2.)Consider an airport that produces noise that decays as the distance (d), in kilometers,from the airport increases: N(d) 1/d2. Fritz works at the airport. Fritz's damagefrom noise is \$1 per unit of noise and is associated with where Fritz lives. His costs ofcommuting are \$1 per kilometer (each way). The closest he can live to the airport isd 0.1 km.mSWrite an expression for Fritz's total costs (noise and transportation).b. What is the distance Fritz will live from the airport in the absence of compensa-tion for the noise? What are his total costs?а.bouseb uDc.adsSuppose Fritz is compensated for his damage, wherever he may live. How closeto the airport will he choose to live? How much will he be compensated?(Hint: Solve graphically or using calculus.)3. When sulfur dioxide is emitted into the air it is transported over long distancesand is converted to sulfuric acid. This gradually falls to the ground, either as rainor snow or simply by settling out of the air. This is called acid deposition. In whatway could acid deposition be consider a rival bad? [Hint: See the paper by Freeman,1984.]4. Why is lumpsum compensation for an externality nondistortionary?lo

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attached below is question 2 i am struggling to solve

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Step 1

a.

The airport produces the noise pollution which decays as the distance increases from the airport. Thus, when the individual lives as much as away from the airport, there will be least pollution due to the noise. In this case, the closest that the individual can live is 0.1 kilometers away from the airport. The individual is working at the airport and that means as the distance increases, the cost of travelling increases. The summation of the noise damage as well as the transportation cost is the total cost of the individual. It can be thus, indicated as follows:

Step 2

b.
When there is no compensation available for the individual, the individual would decide to minimize the total cost from noise. As the individual increases the distance from airport, it will increase the transportation cost while reducing the n...

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