A small chemical plant near the city of Cincinnati, OH was found to have buried hundreds of tons of hazardous wastes underground without proper treatment. This has led to severe pollution in the nearby soil and water body. The city has 300,000 residents as of today.

b. Upon further investigation, the waste site severely deteriorates the drinking water quality for the entire city. Scientists have estimated that with this increased level of pollution, the mortality risk facing Cincinnati residents from drinking polluted water is 0.01% (1 in 10,000). With an EPA guideline VSL of $8 million, what is the estimate of total economic damage caused by the hazardous waste?

c. Suppose the city of Cincinnati can now spend 10 million dollars to clean up that waste site and the damaged drinking water source. What is the benefit-cost ratio of this project, implied by the health risk study?

d. What is the benefit-cost ratio implied by the hedonic property price study?

e. The city now has a property tax rate of 3% annually on real estates. How much extra tax revenue will the city be able to collect each year, if the city decides to clean up that waste site? (assuming that housing price will bounce back to the pre-pollution level)

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