Scenario: A chemical factory is located upstream on a river. The factory dumps its liquid waste into the river. A microbrewery is located downstream on this river; it uses the river water in its production process and values the clean water. The chemical factory can filter its liquid waste before dumping it into the river, but it would be costly to the factory. The table below shows the profit to these two businesses under different circumstances.
-Refer to scenario above.Suppose the negotiation between the chemical factory and microbrewery is costless.What is the maximum that the microbrewer would be willing to pay the chemical factory to filter its waste?
Definitions:
Price Effects
Refers to the impact of price changes on the consumer's choice and the quantity demanded of goods and services.
Quantity Effects
The changes in the amount of goods or services produced or consumed in response to changes in price or other factors.
Total Revenue
The overall financial income a company acquires from its commercial activities, including the sale of goods and provision of services, within a certain period.
Downward-Sloping
Refers to a curve or line that decreases in value as it moves from left to right, often used in economics to describe demand curves where quantity demanded decreases as the price increases.
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