1. What is the major problem in achieving an efficient use of the world's water? If there were a global market in water, like there is in oil, how do you think the market would work? Would a free world market in water achieve an efficient use of the world's water resources? Explain why or why not.

2. Under what circumstances, and why, would the government be opposed to a merger of two firms? How does the Justice Department decide which mergers to challenge?

3. Explain the difference between fixed-production technology and variable-production technology. Should the government set a goal of reducing the marginal social cost of pollution to zero in industries with fixed-production technology? Should they do so in industries with variable technology?

4. What is the "regulatory dilemma"? That is, what trade-offs do regulators have to consider when deciding how to control a natural monopoly?

5. What is the underground economy? What is the impact on the underground economy of instituting a tax on a certain productive activity?