Welfare (2 problems)

In each case below, identify the spillover effect being described.

a) Pollutants from a nearby factory are contaminating lake Bluewater. Cottage owners along the lake are outraged.

b) A new anti-flu vaccine proves to be harmful to seniors.

c) In a particular suburb, residents lobby against a land fill site.

The table below shows the total benefits and costs of five possible plans (each of increasing scope) for a hospital to be built on a particular site.

a) Indicate which plan should be adopted, using the marginal benefit equals marginal cost rule.

b) Confirm your answer in part (a) by computing each project's net benefit.