a. If residents are permitted unlimited access to the use of
the grazing land at a zero price, what is the private
marginal cost of grazing? Draw the MC curve in the
diagram.
b. Given your answer to part (a), what level of grazing will
occur if there is unrestricted access to the land?
c. Is the outcome from part (b) efficient? Why or why not?
d. What is the efficient level of grazing, and how is this
shown in the diagram? Explain.
e. Explain why charging residents a fee per unit of access
would improve allocative efficiency. How would this be
shown in the diagram?
f. Explain why selling individual parcels of the grazing land
to the town’s residents is also likely to improve efficiency.
11. In the text we discussed how rent seeking is one of the costs of
government intervention. Consider a group of pig farmers who
are lobbying the federal government for some form of financial
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