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Public Goods and Common Resources1: Classify the following goods as public goods, private goods, common resources or natural monopolies. With each good, is there a free-rider problem? If not, how is it avoided? The goods are:Measles vaccinationFire protectionRoute 9 Motorway, which circumnavigates the New Territories on a day it is uncongestedNew Year celebrations in Victoria HarbourRoute 1 Motorway connecting Aberdeen and Shatin on a Friday afternoon.Hong Kong’s sewerage systemPCCW cable network The Wilson Trail which traverses eight of Hong Kong’s country parks2: The table below provides information about a mosquito control program.Quantity (square miles per day)Marginal Social Cost ($ per day)Marginal Social Benefit ($ per day)000110005000220004000330003000440002000550001000(a) What quantity of spraying would a private mosquito control program provide?(b) What is the efficient quantity of spraying?(c) In a single-issue election on the quantity of spraying, what quantity would the political outcome deliver?3: The following table shows the marginal benefit per year to all the households in a small community from the hiring of additional fire fighters. The table also shows the marginal cost per year of hiring additional fire fighters per year.Number of fire-fighters Marginal Social Benefit ($)Marginal Social Cost ($)11,000,00034,0002500,00035,0003300,00036,0004100,00037,000570,00038,000650,00039,000740,00040,000830,00041,000920,00042,0001010,00044,000 (a) Is the service provided by the additional fire fighters a public good?(b) Why might the marginal benefit from an additional fire-fighter decline with the number of fire fighters?(c) Plot the marginal benefit and the marginal cost in a graph, with the number of fire fighters on the horizontal axis.(d) What is the socially optimal amount of this good (in terms of the number of fire fighters)? 4: Suppose there is a neighbourhood crime watch in which people volunteer to patrol the street where you live. If you do not participate in the patrol, but your neighbourhood is safer because of the crime watch, are you a free rider? Why? What can your neighbours do to eliminate the free-rider problem?5: Public education is not a public good, but it has external effects. Explain.6: Suppose that people value the continued existence of dolphins in the Pacific Ocean, but that tuna-fishing fleets kill large numbers of these mammals. Draw a graph showing this externality. Describe two alternative approaches to remedy the externality.7: Property rights over the world’s oceans are not well defined. Recently, experts have noted that stocks of fish are declining, as the seas’ resources are over-used. Explain, in economic terms, why this might have happened.Is this an example of Tragedy of the Commons?Commercial fishing firms all over the world are complaining about the decline in their industry. The response of many governments has been to subsidize the fleets in their countries. Explain why this is an example of government failure. ................
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