b Can you think of any reasons why this solution might not work in the real

B can you think of any reasons why this solution

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b) Can you think of any reasons why this solution might not work in thereal world? 6. The Pristine River has two polluting firms on its banks. EuropeanIndustrial and Creative Chemicals each dump 100 tonnes of effluent intothe river each year. The cost of reducing effluent emissions per tonneequals €10 for European Industrial and €100 for Creative. The governmentwants to reduce overall pollution from 200 tonnes to 50 tonnes per year.a) If the government knew the cost of reduction for each firm, whatreductions would it impose to reach its overall goal? What would be thecost to each firm and the total cost to the firms together?
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c) Compare the total cost of pollution reduction in parts (a) and (b). If thegovernment does not know the cost of reduction for each firm, is therestill some way for it to reduce pollution to 50 tonnes at the total cost youcalculated in part (a)? Explain.
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  • Spring '14
  • Market failure, The Market, Externality, Creative Chemicals

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