There is a large steel factory next to a private lake owned by a single individual....
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There is a large steel factory next to a private lake owned by a single individual. Pollution from the factory contaminates the lake, reducing the stock of fish and other aquatic animals. The pollution runoff affects only the owner's private lake. The marginal benefit to the steel factory of pollution is MB = 400 – 2Q, where Q is the amount of water pollution in tons. The marginal cost to the lake owner is MC = 3Q. Assume that the amount of pollution damage is measurable, benefit and cost curves are known with certainty, and that there are no transaction costs for negotiation. With this information, answer the following questions: What is the efficient quantity of pollution? Illustrate on a graph. Recall the Coase Theorem, which indicates that the assignment of property rights to one party or the other is irrelevant when determining the efficient allocation of resources. First assume that owner of the lake has the property rights. Calculate the net gains or loses for both the owner and the factory. What is the total net social welfare? There is a large steel factory next to a private lake owned by a single individual. Pollution from the factory contaminates the lake, reducing the stock of fish and other aquatic animals. The pollution runoff affects only the owner's private lake. The marginal benefit to the steel factory of pollution is MB = 400 – 2Q, where Q is the amount of water pollution in tons. The marginal cost to the lake owner is MC = 3Q. Assume that the amount of pollution damage is measurable, benefit and cost curves are known with certainty, and that there are no transaction costs for negotiation. With this information, answer the following questions: What is the efficient quantity of pollution? Illustrate on a graph. Recall the Coase Theorem, which indicates that the assignment of property rights to one party or the other is irrelevant when determining the efficient allocation of resources. First assume that owner of the lake has the property rights. Calculate the net gains or loses for both the owner and the factory. What is the total net social welfare?
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A large steel factory contaminates the water of the private lake owned by an individual The pollution run off effects the owner of the private lake Th... View the full answer
Related Book For
Elementary Statistics
ISBN: 978-0538733502
11th edition
Authors: Robert R. Johnson, Patricia J. Kuby
Posted Date:
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