(Total: 36 pts) Suppose a chemical factory discharges waste product into a river resulting in significant damages to a local fishery. The marginal damage to the fishery (measured in terms of the value of lost fish stocks) is represented by the equation: MD = 10E The chemical factory can reduce its effluent flows by treating its waste products. Its marginal abatement cost (MAC) function is given by the equation: MAC = 1,200 - 5E.
d) (8pts) If the chemical factory has the property right to use the river, what bargaining will result in the socially efficient equilibrium? What are the net gains experienced by each party?
(Total: 36 pts) Suppose a chemical factory discharges waste product into a river resulting in significant...
(Total: 36 pts) Suppose a chemical factory discharges waste product into a river resulting in significant damages to a local fishery. The marginal damage to the fishery (measured in terms of the value of lost fish stocks) is represented by the equation: MD = 10E The chemical factory can reduce its effluent flows by treating its waste products. Its marginal abatement cost (MAC) function is given by the equation: MAC = 1,200 - 5E. a) (8pts) What level of emissions...