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Economics 103 Your Name(s):__________________________________________

Professor Friedman Your TA:____________________________________________

Fall 2019 Your Section Time and Day:_____________________________

Note that there are two types of problems. You are encouraged to work with someone else in your TA section on the quantitative problems (1, 2); hand in one set of answers to these problems with both your names . Do the essay questions individually (3, 4, 5) and append separate answers with each person’s name for these along with your group answers to the quantitative questions. Type your answers; staple pages together.

(4 points) Externalities. The Trump administration is trying to reverse the Obama administration’s “Clean Power Plan” restricting carbon dioxide emissions from power plants and regulations requiring new coal burning power plants to capture carbon dioxide emissions in order to encourage the development of clean solar and wind energy and slow climate change. The Supreme Court has required the Obama administration to justify environmental regulations on a cost-benefit basis and the Trump administration claims the economic benefits from reducing greenhouse gas emissions are less than the costs of cleanup. In making this argument, the Trump administration chooses not to count among the benefits reduced healthcare costs, or the benefits of breathing cleaner air and drinking cleaner water. Critics argue that in addition to creating tens of thousands of renewable energy jobs, the clean power plan would generate $54 billion in health climate benefits, avoiding 90,000 childhood asthma attacks and saving 3600 lives per year.

(1 point) Should all pollution to be prevented? Is there an “efficient” level of pollution greater than zero? What would constitute an efficient level of pollution?

(2 points) Could the market lead to the efficient level of pollution if there are full and clear property rights? How might this operate between young children with asthma and the owners of coal-fired power plants?

(1 point) Why didn’t the market prevent this toxic pollution without government involvement? Read “Mapping Environmental Injustice” (Real World Micro, 6.7.) Why is pollution concentrated in poor and nonwhite neighborhoods? In what ways does this reflect a failure of the market solution? Given your argument in part B above, which do you think is better: government regulation or market solutions?

(3 points) Is inequality necessary? Is it good?

(1 point) Should we equalize income for all Americans? Explain the utilitarian and Rawlsian arguments for egalitarian social policies.

(1 point) Should we equalize income for all Americans? Explain alternative arguments against egalitarian policies, such as natural rights arguments (John Locke and Robert Nozick) and utilitarian arguments (Arthur Okun).

(1 point) Gender and inequality: are egalitarian policies gendered? Do women benefit more from egalitarian policies that reduce disparities in income?

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