21. A factory is polluting a river which is the source of drinking water for a town of 10,000 people who live downstream of the factory. It would cost $350,000 for the factory to install pollution abatement equipment. The townsfolk collectively value clean water at $480,000. Explain, using examples, how the private parties (i.e., the factory and the townsfolk) might solve the environmental problem described in the scenario in each of the following two situations: i) The factory has the right to pollute. ii) The townsfolk have the right to clean water.
21. A factory is polluting a river which is the source of drinking water for a town of 10,000 people who live downstream of the factory. It would cost $350,000 for the factory to install pollution abatement equipment. The townsfolk collectively value clean water at $480,000. Explain, using examples, how the private parties (i.e., the factory and the townsfolk) might solve the environmental problem described in the scenario in each of the following two situations: i) The factory has the right to pollute. ii) The townsfolk have the right to clean water.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:21.
A factory is polluting a river which is the source of drinking water for a town of 10,000
people who live downstream of the factory. It would cost $350,000 for the factory to install
pollution abatement equipment. The townsfolk collectively value clean water at $480,000.
Explain, using examples, how the private parties (i.e., the factory and the townsfolk) might solve
the environmental problem described in the scenario in each of the following two situations:
i) The factory has the right to pollute.
ii) The townsfolk have the right to clean water.
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