Suppose that a chicken farm uses a nearby stream to dispose of the wastes released by its chickens. These wastes flow downstream into a lake that has become thick with algae and polluted by the minerals in the waste matter. The local office of a nonprofit environmental organization collects enough donations to fund a campaign to stop the farm's pollution.

What is a negative externality?  What is an example of a negative externality?  What is a solution for dealing with a negative externality?

No hand written solution Afirm has an industrial plant that emits pollutants into a town’s lake. The plant’s marginal abatement function is MAC= 200 – 0.5E and damages caused by its emissions are given by MD = 2E where emissions are in kg. per day. What is the socially efficient level of emissions from this plant? Illustrate this in a graph.   As an incentive to reduce emissions to the socially efficient level, government offers to pay the firm for each kg. of emissions it abates per day from this plant.   What subsidy per kg. should the government offer? If the plant abates to the socially efficient level of emissions, what total subsidy payment would the firm receive? Identify the area in your graph. How much better or worse off would the firm be compared to if it did no abating? Identify the area in your graph. What would be the net benefit to society if we pay the firm to reduce the plant’s emissions to the socially efficient level? Identify this area in your graph.

Summarize the effects of the Clean Air Act on U.S. air pollution.

Your company operates in a perfectly competitivemarket. You have been told that advertising can help youincrease your sales in the short run. Would you create anaggressive advertising campaign for your product?

QUESTION 3 Fill in the blanks: pollutants are pollutants for which the environment has little or no absorptive capacity. pollutants are pollutants for which the environment has some absorptive capacity.

What happens in the market for a good that pollutes the air when it is manufactured if government decides to tax consumers when the product is purchased? Will this reduce the amount of air pollution?

Air horns impose many external costs on society: the risk of being deafened, the annoyance of being awakened in the middle of the night, and so on. Therefore, the market equilibrium quantity of air horns is not equal to the socially optimal quantity. The following graph shows the demand for air horns (their private value), the supply of air horns (the private cost of producing them), and the social cost of air horns, including both the private cost and external costs. Use the black point (plus symbol) to indicate the market equilibrium quantity. Next, use the purple point (diamond symbol) to indicate the socially optimal quantity.

Hand written solution is not allowed please my dear.

Suppose households do not care much for better environmental quality. Use the demand & supply model for urban labor to illustrate what happens to total employment (L) when a tax is imposed on firms to internalize the negative externalities of pollution. Briefly discuss.