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"An upstream paper mill releases moderate amounts of pollutants into a waterway. A downstream fishery suffers an economic cost from this pollution of...

"An upstream paper mill releases moderate amounts of pollutants into a waterway. A downstream fishery suffers an economic cost from this pollution of $100,000 annually. This cost burden would fall to $30,000 if the pollution were reduced by 50 percent. Complete (100 percent) cleanup would cost the mill $120,000, whereas a 50 percent cleanup would cost $50,000.
a. Currently, the mill has the legal right to pollute. Can the parties come to a mutually beneficial agreement to reduce pollution? If so, hoe much pollution should be reduced?
b. Answer part (a) assuming the fishery has the legal right to clean water. "
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Dear Student Please find... View the full answer

8198933.doc

(a) if the firm has legal right to pollute, then the only way the fishery and mill can negotiate
would be if fishery could pay some amount to firm so as to reduce pollution. Also that profit
earned...

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