Q1. The coase theorem: Suppose a firm pollutes a stream that has a recreational value only when pollution is below a certain level. If transaction costs are low, why does the assignment of property rights to the stream lead to the same (efficient) level of pollution whether the firm or recreational users own the stream?

Q2. Suppose MPC is0.8 initially. Households then change their behavior so that the MPC falls to 0.75. What happens to aggregate expenditures? Why?

Q3. You have been asked to estimate the cost of 1,000 pre fabricated structures to be sold to a local store school district. Each of these structures provides 1,000 ft2 of floorspace.