Total 20 points.
(3 points) Externalities. United Airlines flies in and out of Logan Airport carrying people to cities throughout the world. Their flights are noisy and spread pollution over East Boston and Revere, disturbing the residents of these cities and lowering the value of their property. (1 point) What are the conditions of an efficient resolution to this dispute? (1 points) If there is a law restricting noise and pollution, then what can the airline do to continue to fly to and from Logan? Can there be an efficient outcome? Would you expect this to happen? (1 point) If there is a law allowing noise and pollution (or at least no law prohibiting it), then what could the neighbors do to stop the noise and pollution? Can there be an efficient outcome? Would you expect this to happen? (3 points) Why do we have economic growth? What is the “Commons” and who should profit from it? Consider the argument made by Peter Barnes, article 1.5 in Real World Micro. Give some examples of commons wealth? Who creates “commons wealth”? Who benefits from it? What would be a fair and equitable allocation of the commons wealth?
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