37. Can extreme levels of pollution hurt the economic development of a high-income country? Why or why

not?

38. How can high-income countries benefit from covering much of the cost of reducing pollution created by

low-income countries?

39. Technological innovations shift the production possibility curve. Look at graph you sketched for Exercise

12.13. Which types of technologies should a country promote? Should “clean” technologies be promoted

over other technologies? Why or why not?

Problems

40. Show the market for cigarettes in equilibrium, assuming that there are no laws banning smoking in

public. Label the equilibrium private market price and quantity as Pm and Qm. Add whatever is needed to

the model to show the impact of the negative externality from second-hand smoking. (Hint: In this case it

is the consumers, not the sellers, who are creating the negative externality.) Label the socially optimal
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