Consider a coal-fired power plant, which emits smoke. The smoke harms tourism at a fishing lodge on a neighboring lake. The owner of the lodge would like the plant owner to install a smokestack scrubber to reduce the pollution. The scrubber costs $37,000. The lodge owner offers to pay the plant owner $8,000 a year during the next five years if he installs the scrubber. Should the plant owner accept the deal? Clearly state vour assumptions,

Consider a coal-fired power plant, which emits smoke. The smoke harms tourism at a fishing lodge on a neighboring lake. The owner of the lodge would like the plant owner to install a smokestack scrubber to reduce the pollution. The scrubber costs $37,000. The lodge owner offers to pay the plant owner $8,000 a year during the next five years if he installs the scrubber. Should the plant owner accept the deal? Clearly state vour assumptions,

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Example: Question 4a.) Arthur’s demand to reduce electric and magnetic fields (EMFs) is P = 20 – 2 Q, whileRonald’s demand is P = 15 – 3 Q. If the marginal cost of reducing emissions is equal to$15 and is constant, what is the optimal amount of EMF reduction? b.) What Lindahl prices would you charge Arthur and Ronald? What might prevent you fromcollecting these prices?c.) How would your answers change if the marginal cost of reducing emissions was equal to$10 and is constant?d.) What are the consumer surpluses of Arthur and Ronald in c.)?
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