Reference no: EM133918426

Problem

Recitation - Externality in Real Estate Central Airport specializes in transporting cargo and runs hundreds of flights every day. Since most aircrafts are large cargo-carrying planes, the average decibel within a radius of the airport is 100dB, which is above the recommended sound exposure for humans. Located within a radius of this airport, is Peace Ville, a neighborhood of 1,000 residents. Given in the table, are total revenue and total cost, from running every hundred flights. You also know that the health costs, which includes such problems as hearing loss and cardiovascular diseases imposed on residents in Peace Ville is $6,000 for every hundred flights run from the airport. Number of Marginal Total Marginal Total Marginal Profit Flights Social Revenue Revenue Cost Cost Cost (iv) ('00) ('00) (1) "00 (ii) (iii) $115 $10 2 210 30 285 60 A W 340 100 5 375 150. i. Complete columns (i) and (ii). Define profit maximization point using marginal revenue and marginal cost concepts. What is the profit maximizing number of flights for the airport? ii. Now complete column (iv). What is the profit maximizing number of flights? Does it agree with your findings in (i)? iii. Now complete column (iii). What is the optimal number of flights? Propose how the government can force this outcome. v. Now suppose that the residents of Peace Ville had entered into an agreement with Central Airport for some payment scheme that forces the airport to run an optimal number of flights. Get the instant assignment help. Describe the proposed payment scheme and fill up the table. What is the optimum number of flights? Do you reach the same outcome as in (iii)? What is the economic theorem that predicts this outcome equivalence?