Suppose Erie Textiles Can Dispose of Its Waste "For Free

question 128

Multiple Choice

Suppose Erie Textiles can dispose of its waste "for free" by dumping it into a nearby river. While the firm benefits from dumping waste into the river, the waste reduces fish and bird reproduction. This causes damage to local fishermen and bird watchers. At a cost, Erie Textiles can filter out the toxins, in which case local fishermen and bird watchers will not suffer any damage. The relevant gains and losses (in thousands of dollars) for the three parties are listed below. The cost (in thousands of dollars) of the filter to Erie Textiles is ________, and the net benefit (in thousands of dollars) of the filter to the fishermen and bird watchers is ________.

• A)$400; $310
• B)$310; $200
• C)$200; $75
• D)$200; $235

---

Definitions:

Risk Reduction

Strategies and actions undertaken to decrease the likelihood of losses or damage from various risks and threats.

Obligations of Bailees

The duties or responsibilities imposed on a bailee (a person or entity temporarily holding property for another, called the bailor) such as safeguarding the property and returning it in good condition.

Environmental Damage

Harm caused to the natural environment due to human actions or natural disasters.

Liability

The state of being legally responsible for something, particularly for any losses or damages that may result.