Homework Problem for

Environmental Economics
March 9, 2014
Problem 1.
Answer the following questions with some examples.
1. What are the private and public goods?
2. What is the Externality?
3. What is the Supply and Demand Curves?
4. What is the Shortage and Surplus?
5. What are the factors that can shift the Supply/Demand Curves?
6. What is the Monopoly
Problem 2.
A pesticide maker can dump waste into a lake or truck it to a save storage place. The
marginal cost of trucking is a $100 a ton. A trout farm uses the lake, and the table shows
how its profit depends on the quantity of waste dumped.
Trout farm
Quantity
of Waste Profit
(Ton
per (dollars per
week)

week)

0
1
2
3
4
5
6
7

1000
950
875
775
645
500
325
125

1. What is the efficient amount of waste to be dumped into the lake?

2. If the trout farm owns the lake, how much does the pesticide maker pay to the farmer
per ton?
3. If the pesticide maker owns the lake, how much wastes dumped and how much rent
does the farmer pay the factory for the use of the lake?