New homes built by the airport suffer from noise pollution created by a change in air-traffic patterns. If compensation is paid to the homeowners, _____.
a. they will internalize the externality
b. they will use the money to buy soundproofing for their homes
c. it should be equal to the marginal cost of their harm
d. it will reduce or eliminate any incentive to avoid the problem
Question 2
An income tax _____.
a. increases the return to bearing risk, if the company is a monopolist
b. has no impact on the return to bearing risk
c. increases the return to bearing risk
d. reduces the return to bearing risk
The Counteroffensive on Air Pollution
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