1. Reconsider the study done by Carson and Mitchell (1993). Cite any two reasons why their benefit estimate might be inflated. Be specific.
2. Consider the following benefit and cost relation- ships for mercury abatement (A): MSB = 30 - 0.3A MSC = 16 + 0.2A TSB = 30A - 0.15A2 TSC = 16A + 0.1A2
where A is the percentage of mercury abatement and dollar values are in millions.
a. Suppose the mercury abatement level was set at 20 percent for 2003. Are net benefits positive or negative?
b. On the basis of the efficiency criterion, should controls on mercury be tightened or relaxed? Support your response with specific calculations.