produce close substitutes, then Samsung’s investment will produce social benefits.

3. a. $102 million.

b.

If the interest rate is 9%, the cost of financial capital, and the firm can capture the 5% return to society,

the firm would invest as if its effective rate of return is 4%, so it will invest $183 million.

4. When the Junkbuyers Company purchases something for resale, presumably both the buyer and the seller

benefit—otherwise, they would not need to make the transaction. However, the company also reduces the

amount of garbage produced, which saves money for households and/or for the city that disposes of

garbage. So the social benefits are larger than the private benefits.
556

5. Government programs that either pay for neighborhood clean-up directly or that provide reduced tax

payments for those who clean up or fix up their own property could be enacted. It is also easy to imagine
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