Question

1. Waste water discharges in to a river by a tannery causes damages to residents using the water (at the downstream) for various purposes. The relationship between the Emissions (waste water discharges) and the damages to the residents (expressed in monetary terms) is given as MD = 10E where E is volume of waste water discharges in thousands of litres per day. The tannery could install water treatment technology to treat the waste water before discharging. The cost of such technology is called abatement cost. For the firm, the relationship between marginal abatement cost and emissions is given as MAC = 240 – 2E.
   1. What are the current level of emissions and the monetary damage sustained by the residents if the tannery holds property rights over the river? (5 points)
   2. Under this situation (condition given in a), the residents could pay the tannery so that it reduces its waste water discharges. Determine how much they would end up paying for each unit of emission abatement and the total amount paid to the tannery. (15 points)
   3. Compute the gains to each party and the net social benefit under the conditions provided in question b (15 points)
   4. Characterize the initial condition if the residents hold property rights over the river (5 points)
   5. Under this condition (condition d), the tannery could pay the residents (collectively) in order to get the permission to discharge waste water into the river. Determine how much it would end up paying for each unit of emissions and the total amount paid to the residents.   (10 points)
   6. Compute the gains to each party and the net social benefit under the conditions provided in question “e”. (10 points)
   7. Compare the net social benefits generated under the two property rights arrangements. (20 points)

plz do not copy and post other's answer. that answer is incorrect

Answer 1