The Praline River runs through the countries of Freedonia and Anviliania. Firms in Freedonia discharge pollutants...

 

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The Praline River runs through the countries of Freedonia and Anviliania. Firms in Freedonia discharge pollutants into the river. Residents of Anviliania use the river for recreational activities. The marginal costs for Freedonian firms are; MAC 2500 - 15 c where e measures the quantity of emissions. Anvilianians face marginal damage costs, caused by the emissions, of; MDC-100 + 10 c. (a) (b) (c) Find the optimal level of pollution. Draw a diagram illustrating the optimal level of emissions. An Anvilianian economist, Arthur 'Two Sheds' Johnson, suggests that the residents of Anviliania should be given the rights to clean water and that the Freedonian firms should have to pay per unit of emissions. If this policy is accepted, what rate will the Freedonian firms pay? What is the total payment the Anvilianians will receive? (d) How might Mr. Johnson's plan be better in this specific case than the liability approach or the use of government regulation? The Praline River runs through the countries of Freedonia and Anviliania. Firms in Freedonia discharge pollutants into the river. Residents of Anviliania use the river for recreational activities. The marginal costs for Freedonian firms are; MAC 2500 - 15 c where e measures the quantity of emissions. Anvilianians face marginal damage costs, caused by the emissions, of; MDC-100 + 10 c. (a) (b) (c) Find the optimal level of pollution. Draw a diagram illustrating the optimal level of emissions. An Anvilianian economist, Arthur 'Two Sheds' Johnson, suggests that the residents of Anviliania should be given the rights to clean water and that the Freedonian firms should have to pay per unit of emissions. If this policy is accepted, what rate will the Freedonian firms pay? What is the total payment the Anvilianians will receive? (d) How might Mr. Johnson's plan be better in this specific case than the liability approach or the use of government regulation?