Q7.(a) Show that neither the unanimity relationship nor the strict Pareto ordering isnecessarily negatively transitive, even if individual preferences are negativelytransitive.(b) Two textile mills located across a river from each other are polluting theriver. The marginal costs for pollution reduction for each firm areMCE₁ 4E₁+ 4 and MCE₂ 4/3 E₂ + 4/3,Where E is the reduction in pollution from unregulated levels. Theassociated marginal social benefit is estimated to be MSB 10-E, whereEl+ E2= E.(1) What is the socially optimal level of water pollution reduction?What level of per-unit pollution tax, r, will achieve this optimallevel of pollution reduction?

Unanimity relationship shows the group relationship about preferences.A strict Pareto ordering is a…

Answered: Q7. (a) Show that neither the unanimity…

Q7. (a) Show that neither the unanimity relationship nor the strict Pareto ordering is necessarily negatively transitive, even if individual preferences are negatively transitive.

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

Section: Chapter Questions

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Question

Q7.
(a) Show that neither the unanimity relationship nor the strict Pareto ordering is
necessarily negatively transitive, even if individual preferences are negatively
transitive.
(b) Two textile mills located across a river from each other are polluting the
river. The marginal costs for pollution reduction for each firm are
MCE₁ 4E₁+ 4 and MCE₂ 4/3 E₂ + 4/3,
Where E is the reduction in pollution from unregulated levels. The
associated marginal social benefit is estimated to be MSB 10-E, where
El+ E2= E.
(1) What is the socially optimal level of water pollution reduction?
What level of per-unit pollution tax, r, will achieve this optimal
level of pollution reduction?

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3.