Plastics, Inc. and Joe's Canoe Shack both operate businesses located on the river. Plastics, Inc. dumps pollution into the river, which results in fewer canoe rentals for Joe. The marginal cost of cleaning up the pollution is $12,000 for Plastics, Inc. Joe estimates a reduction in pollution will lead to a marginal benefit of $20,000. a. If Joe owns the rights to the river, which of the following is the most likely outcome? O Joe will pay Plastics, Inc. $15,000 not to pollute. Plastics, Inc. will pay Joe $15,000 to pollute. O Joe will enforce his property rights and not allow Plastics, Inc. to pollute. Plastics, Inc. will use its property rights to continue polluting. b. If Plastics, Inc. owns the rights to the river, which of the following is the most likely outcome? O Joe will pay Plastics, Inc. $15,000 not to pollute. O Plastics, Inc. will pay Joe $15,000 to pollute. O Joe will enforce his property rights and not allow Plastics, Inc. to pollute. O Plastics, Inc. will use its property rights to continue polluting. c. The resulting outcome O depends on who owns the rights to the river. O is the same no matter who owns the river.

Plastics, Inc. and Joe's Canoe Shack both operate businesses located on the river. Plastics, Inc. dumps pollution into the river, which results in fewer canoe rentals for Joe. The marginal cost of cleaning up the pollution is $12,000 for Plastics, Inc. Joe estimates a reduction in pollution will lead to a marginal benefit of $20,000. a. If Joe owns the rights to the river, which of the following is the most likely outcome? O Joe will pay Plastics, Inc. $15,000 not to pollute. Plastics, Inc. will pay Joe $15,000 to pollute. O Joe will enforce his property rights and not allow Plastics, Inc. to pollute. Plastics, Inc. will use its property rights to continue polluting. b. If Plastics, Inc. owns the rights to the river, which of the following is the most likely outcome? O Joe will pay Plastics, Inc. $15,000 not to pollute. O Plastics, Inc. will pay Joe $15,000 to pollute. O Joe will enforce his property rights and not allow Plastics, Inc. to pollute. O Plastics, Inc. will use its property rights to continue polluting. c. The resulting outcome O depends on who owns the rights to the river. O is the same no matter who owns the river.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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