1. The optimal level of pollution abatement is the level at which the _________ of abatement equals the _________ of abatement.

2. The marginal cost of abatement typically _________ (increases/decreases) with the level of abatement.

3. The marginal cost of abating methane _________ at a(n) _________ rate. If the marginal benefit of methane abatement is $150 per metric ton, the optimal level of abatement is about _________ million metric tons.

4. Optimal Pollution Abatement. Suppose the marginal benefit of pollution abatement is constant at $12 per unit. The marginal cost of abatement is $2 for the first unit abated and increases by $2 for each additional unit, to $4 for the second unit, $6 for the third unit, and so on. Draw the marginal-benefit and marginal-cost curves and show the optimum level of pollution abatement.

5. Coase and Noise Pollution. Vivian is trying to learn to play the violin, much to the dismay of her housemates. Vivian and her roommates are willing to bargain over her practice time, and will split the difference between the willingness to pay for noise reduction and the willingness to accept it. The following table shows her marginal benefits from playing for one to five hours as well as the marginal external cost incurred by her housemates (constant at $5 per hour).

a. Suppose Vivian has the property rights to make as much noise as she likes. How many hours will Vivian practice? Who gets how much money?
b. Suppose the housemates have the property rights to a quiet house. How many hours will Vivian practice? Who gets how muchmoney?

Transcribed Image Text:

Hour 4 Marginal benefit to Vivian $108 S6 4$2 Marginal external cost $5$5 $5 5 $5