-A Paper Mill Dumps Waste into a Lake Used by a Catfish

question 358

Essay

-A paper mill dumps waste into a lake used by a catfish farmer. The table above shows costs and benefits arising from the production of paper.
a) Draw the paper mill's marginal private cost curve, the marginal social cost curve, and the marginal social benefit of paper curve.
b) What is the efficient level of paper production? If no one owns the lake and there is no regulation of pollution, what is the quantity of paper produced per week? Illustrate the deadweight loss in your figure.
c) If the government introduces a Pigovian tax, what is the tax per ton of paper produced that achieves an efficient outcome? What is the amount of the tax?
d) If the catfish farmer owns the lake, how much paper is produced per week and what does the paper mill pay the farmer per ton? Explain you answer.
e) If the paper mill owns the lake, how much paper is produced per week? Explain.
f) Compare the quantities of paper produced in (c) and (d) and explain the relationship between these quantities.

---

Definitions:

Femininity

A set of attributes, behaviors, and roles traditionally associated with girls and women.

Masculinity

A set of attributes, behaviors, and roles associated with boys and men as defined by society.

Lewis Terman

An American psychologist best known for his revisions of the Stanford-Binet IQ test and his research in intelligence.

Catherine Cox Miles

A psychologist known for her work in the field of gifted children and intelligence, including the biographical analysis of 301 geniuses.