Suppose a paper mill earns $1,000,000 in profits when it pollutes a river, and it can abate pollution at a cost of $120,000. The effects of the pollution are confined to a single farmer who earns $400,000 if the water he uses from the river is clean, and $300,000 if it's polluted. Suppose there is no law preventing the firm from polluting the river. Which of the following describes an efficient outcome in this case?
A. The owner of the mill is unable to pay the farmer enough to secure his permission to pollute the river.
B. The farmer is unable to pay the owner of the mill enough to get him to stop polluting.
C. The owner of the mill pays the farmer $110,000 for his permission to pollute the river.
D. The farmer pays the owner of the mill $90,000 to stop polluting.
B. The farmer is unable to pay the owner of the mill enough to get him to stop polluting.
You might also like to view...
The loss to society resulting from a tax includes the
A) deadweight loss. B) consumer surplus paid to the government in the form of tax revenue. C) producer surplus paid to the government in the form of tax revenue. D) deadweight loss plus the consumer surplus and producer surplus paid to the government as tax revenue. E) deadweight loss minus the tax revenue collected by the government.
The public debt is the
A. accumulation of all past deficits minus all past surpluses. B. amount of U.S. paper currency in circulation. C. ratio of all past deficits to all past surpluses. D. difference between current government expenditures and current tax revenues.