Three neighboring towns – Marshland, Dampland, and Wetland – all border the same lake. The lake frequently floods causing damage to property in all three 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: ***Please Note*** Previous Expert Calculated: Z = 16/3 as the Solution to (a) Math Solver Calculates: Z = 1 ***Please Resolve*** (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?
- Three neighboring towns – Marshland, Dampland, and Wetland – all border the
same lake. The lake frequently floods causing damage to property in all three
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:
***Please Note***
Previous Expert Calculated: Z = 16/3 as the Solution to (a)
Math Solver Calculates: Z = 1
***Please Resolve***
(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?
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