Suppose the LNG Inc A Fill in the Blanks in the Table

question 50

Essay

Suppose the LNG Inc. company wants to build three pipelines that would carry fuels under your city. The pipelines pose risks of groundwater contamination and explosion. For each pipeline the table below shows the marginal benefit to LNG Inc. and the marginal cost of expected damages to residents (in millions of dollars).
$$\begin{array} { c c c c c } \text { Pipelines } & \begin{array} { c } \text { Total Profits } \\\text { for LNG Inc. }\end{array} & \begin{array} { c } \text { Total Damage to } \\\text { Residents }\end{array} & \begin{array} { c } \text { Marginal Benefit } \\\text { (added profits) }\end{array} & \begin{array} { c } \text { Marginal Cost } \\\text { (added damages) }\end{array} \\\hline \hline 0 & 0 & 0 & 0 & 0 \\1 & - & - &120 & 55 \\2 & - & - & 80 & 75 \\3 & - & -& 70 & 125\end{array}$$ a. Fill in the blanks in the table.
b. What is the efficient number of pipelines? _____________
c. Suppose that LNG Inc. is entitled under the injunctive remedy. What is the range of offers (in millions of dollars) that the residents might make and LNG Inc. might accept to eliminate the third pipeline? Between __________ and ___________.
d. If residents are entitled under the damages remedy, at the level of output selected by LNG Inc., what is the total amount of compensation LNG Inc. will provide to the residents? _____________

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Definitions:

Nominal Rate

The interest rate stated on a loan or investment agreement, not accounting for inflation or compounding effects.

Semi-Annual Payments

Payments made twice a year, often used in the context of loan repayments or bond interest payments.

Nominal Rate

The stated interest rate of an investment or loan, which does not account for compounding or inflation effects.

Monthly Compounded

A method where interest adds to the principal sum at the end of each month, allowing for the interest in the next month to be based on the new total.