BN8.3 Case Three Neighboring Towns - Marshland, Dampland, & Wetland - all border the same Lake. The Lake frequently floods causing damage to property in all 3 Towns. Each Town would benefit from Flood Mitigation, but the Level of Benefits differs. With Z representing the Level of Mitigation: for Marshland, MB = 3-Z for Dampland, MB = 4-2Z for Wetland, MB = 11- Z The marginal cost of flood mitigation is MC = 2 + 12Z Questions: (a) What is the Socially Optimal Level of Z? (b) What would each Individual Town be willing to Pay for this Level of Flood Mitigation? (c) The Representative from Wetland proposes that each Town Pay an equal share for the Optimal Level of Flood Mitigation. Would this Pricing Strategy work?

BN8.3 Case Three Neighboring Towns - Marshland, Dampland, & Wetland - all border the same Lake. The Lake frequently floods causing damage to property in all 3 Towns. Each Town would benefit from Flood Mitigation, but the Level of Benefits differs. With Z representing the Level of Mitigation: for Marshland, MB = 3-Z for Dampland, MB = 4-2Z for Wetland, MB = 11- Z The marginal cost of flood mitigation is MC = 2 + 12Z Questions: (a) What is the Socially Optimal Level of Z? (b) What would each Individual Town be willing to Pay for this Level of Flood Mitigation? (c) The Representative from Wetland proposes that each Town Pay an equal share for the Optimal Level of Flood Mitigation. Would this Pricing Strategy work?

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter14: Environmental Economics

Section: Chapter Questions

Problem 7SQ

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