Chap011.4 - Costs and Benefits of Eliminating Toxic Waste...

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4 Chapter 11: Externalities and Property Rights Slide 19 External Costs and Benefits ± Question z Why should Fitch pay Abercrombie to filter out toxins that would not be there in the first place if not for Abercrombie’s factory? Chapter 11: Externalities and Property Rights Slide 20 Costs and Benefits of Eliminating Toxic Waste (Part 3) $70/day $100/day $150/day $100/day With filter Without filter Gains to Abercrombie Gains to Fitch Fitch would gain $30 with the filter but the outcome is inefficient Abe pays Fitch $40 to operate without the filter Allowing pollution increases economic surplus Chapter 11: Externalities and Property Rights Slide 21 External Costs and Benefits ± When polluters are liable: z Polluter’s income is lowered. z Those injured by pollution will have higher income.
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This note was uploaded on 02/20/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.

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