13.2 Consider a river with a paper mill and a commercial salmon fishery. The fishery canoperate at one of two locations: upstream (above the mill) or downstream (in the pollutedpart of the river). Pollution lowers profits for the fishery: without pollution, profits are $300upstream and $500 downstream; with pollution, profits are $200 upstream and $100 down-stream. The mill earns $500 in profit, and the technology exists for it to build a treatmentplant at the site that completely eliminates the pollution, but at a cost of $200. There aretwo possible assignments of property rights: (i) the fishery has the right to a clean river and(ii) the mill has the right to pollute the river.a. What is the efficient outcome?b. What are the outcomes under the two different property regimes if bargaining is not anoption? Is the optimal outcome achieved?c. What are the outcomes under the two different property regimes if the firms can bargaincostlessly? Is the optimal outcome achieved?d. How do the above answers change if the technology instead cost $350?

What is the efficient outcome?The efficient outcome occurs at the point when the total…

Answered: 13.2 Consider a river with a paper mill…

ECON MICRO

5th Edition

ISBN:9781337000536

Author:William A. McEachern

Publisher:William A. McEachern

Chapter17: Externalities And The Environment

Section: Chapter Questions

Problem 2.6P: (External Costs with Variable Technology) Think of an industry that pollutes the water and has...

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Similar questions

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(External Costs with Variable Technology) Think of an industry that pollutes the water and has access to variable technology for reducing that pollution. Graphically illustrate and explain the impact of each of the following, other things constant, on the optimal level of water quality: a. New evidence is discovered about a greater risk of cancer from water pollution. b. The cost of pollution-control equipment increases. c. A technological improvement reduces the cost of pollution control.
Economists sometimes shock noneconomists by stating that they do not favor the complete elimination of pollution. Explain the rationale for this position.
Table 12.12, shows the supply and demand conditions for a firm that will play trumpets on the streets when requested. QS1 is the quantity supplied without social costs. QS2 is the quantity supplied with social costs. What is the negative externality in this situation? Identify the equilibrium price and quantity when we account only for private costs, and then when we account for social costs. How does accounting for the externality affect the equilibrium price and quantity?
ЕOC 11.04 Consider two car factories, one run by Ford and the other run by Honda, that both create pollution. The government wants to reduce how much these two factories pollute by 40 tons, so only allow factories to pollute if they have a permit. Each factory is given 20 pollution permits. A business can use a permit to emit one ton of pollution or they can sell it to another business (and lose the ability to pollute). To lower pollution it costs Ford $200 per ton of pollutant removed and it costs Honda $100 per ton removed. After Ford and Honda have met to trade their permits with each other, what we expect to happen? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. Honda emits 20 tons of pollutants and Ford emits 20 tons of pollutants. a Honda no longer pollutes and Ford does not lower how much it produces. Honda increases its pollution and Ford lowers its pollution. Ford no longer pollutes and Honda does not lower how much it…
EOC 11.04 Two businesses, X and Y, each dump 20 tonnes of pollution into a creek. In an effort to reduce pollution, the government will now require businesses to have a pollution permit to dump pollutants in the creek. Each business receives 10 pollution permits and they can use it to pollute or sell it to the other business (but lose the ability to pollute). To reduce pollution it costs business X $100 per tonne of pollutant eliminated and it costs business Y $50 per tonne of pollutant eliminated. Once the two businesses have traded these permits with each other, what is the likely outcome? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a business X emits 10 tonnes of pollutants and business Y emits 10 tonnes of pollutants. b business X no longer pollutes, and business Y will not lower the amount it pollutes. business X raises its pollution, and business Y will lower how much it pollutes. business Y no longer pollutes, and…
17. Two firms, A and B, each currently dump 50 tonnes of chemicals into the local river. From now on both firms will require a pollution permit for each tonne of pollution dumped. The government gives each firm 20 tonnes' worth of pollution permits, which it can either use or sell to the other firm. It costs Firm A $100 for each tonne of pollution that it eliminates before it reaches the river, and it costs Firm B $50 for each tonne of pollution that it eliminates before it reaches the river. After the two firms buy or sell pollution permits from each other, what would we expect that Firm A and Firm B will dump? a Firm A will dump 10 fewer tonnes of pollution into the river, and Firm B will dump 50 fewer tonnes of pollution into the tiver. b. Firm A will dump 50 fewer tonnes of pollution into the iver, and Firm B will dump 10 fewer tonnes of pollution into the river. c. Firm A will dump 50 fewer tonnes of pollution into the river, and Firm B will dump 10 more tonnes of pollution into…
Exercise 1.23: Challenging Question. The Mondevil Corporation operates a chemical plant, which is located on the banks of the Sacramento river. Downstream from the chemical plant is a group of fisheries. The Mondevil plant emits by- products that pollute the river, causing harm to the fisheries. The profit Mondevil obtains from operating the chemical plant is $II > 0. The harm inflicted on the fisheries due to water pollution is equal to $L > 0 of lost profit [without pollution the fisheries' profit is $A, while with pollution it is $(A - L)]. Suppose that the fisheries collectively sue the Mondevil Corporation. It is easily verified in court that Mondevil's plant pollutes the river. However, the values of II and L cannot be verified by the court, although they are commonly known to the litigants. Suppose that the court requires the Mondevil attorney (player 1) and the fisheries' attorney (player 2) to play the following litigation game. Player 1 is asked to announce a number x≥0,…
Firm A currently dumps 243 tons of chemicals into the local river. Firm B currently dumps 126 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government gives Firm A 61 pollution permits and gives Firm B 65 pollution permits. The abatement costs of one ton of pollution is $113 for Firm A and $165 for Firm B. What would be the total cost of reducing pollution, if the government does NOT allow the firm to trade the permits between each other?
please help me with this question
Firm A currently dumps 247 tons of chemicals into the local river. Firm B currently dumps 246 tons of chemicals into the local river. The government has decided to reduce the pollution and from now on will require a pollution permit for each ton of pollution dumped into the river. The government gives Firm A 32 pollution permits and gives Firm B 48 pollution permits. The abatement costs of one ton of pollution is $153 for Firm A and $89 for Firm B. What would be the total cost of reducing pollution, if the firms are .allowed to trade permits between each other?

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