Project #3203 - Externalities and Public Good/NonProfit Roles

Public Goods

  1. Define the Coase Theorem and explain its implication for a house and a factory that are adjacent. The factory emits fumes near the house, which causes the neighbor to suffer from asthma. The factory could emit the fumes from the other side of the building, at a cost of $1000, and it is worth $2000 for the neighbor to not suffer from asthma. The factory has the right to emit the fumes. What solution will the factory and the neighbor decide on? Why is it difficult to generalize the Coase Theorem to a larger economy, where more people are hurt by the externality? (5 points)
  2. Are all goods that are provided by the government, ‘public goods’? Name one that is a public good and three that are not. Explain your choices. (5 points)
  3. Why does the government often need to step in for society to obtain an efficient level of public goods? (5 points)

 

NonProfit Overview:

Prior to reading The Role of Nonprofit Firms in your coursepack, read the Appendix in Pindyck and Rubinfeld on the basics of regression. Then, as you read the article, consider the assumptions the researchers are making and the implications of their research on policy. Specific questions are provided below to help focus your reading on important aspects of the article.

As a group, you will work together to prepare a one-page, single-spaced memo explicating The Role of Nonprofit Firms. An excellent memo will:

  • Articulate logical answers to the questions posed in the prompt
  • Describe your group’s reaction to the article
  • Summarize the findings and methods of the researcher(s)
  • Explain the relevance of the research to policy

Prompt:

Discuss nonprofits in the context of public goods and externalities. What is the economic justification for the existence of nonprofit firms? Compare the models of nonprofits presented in this chapter and consider the efficiency of nonprofits. We have just learned that perfectly competitive markets are efficient. Would this imply that nonprofit enterprises are inefficient?

Subject Mathematics
Due By (Pacific Time) 03/16/2013 12:00 am
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