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Econ 101 Class 18 Questions
1.
The following table gives the value of a mill and the value of a fishery as a function of the mill’s
pollution decision
Pollution Decision
Value of Mill
Value of Fishery
High Discharge Rate
$5000
$2000
Low Discharge Rate
$1000
$3000
If the Fishery has the right to block the mill from a high rate of discharge of pollution then…
A.
The Fishery will prefer to exercise its right and keep pollution low.
B.
The Fishery will achieve the social optimum by keeping pollution low.
C.
The Mill will pay the Fishery over $4000 for the right to pollute.
Fishery will go out of
business because of pollution.
D.
The Mill will achieve the social optimum by buying the right to pollute from the Fishery. **
2.
Suppose three companies in the Ohio Valley each produce 1000 tons of S02 per year. The EPA has
decided to reduce emissions by 1200 tons per year. The following table gives the marginal cost per
ton of reducing emissions.
SO2 Reduction
Marginal Cost per Ton of
SO2 Reduction
Firm A
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This note was uploaded on 03/02/2009 for the course ECON 101 taught by Professor Balaban during the Spring '07 term at UNC.
 Spring '07
 BALABAN
 Economics

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