Suppose a Paper Mill Earns $1,000,000 in Profits When It

question 33

Multiple Choice

Suppose a paper mill earns $1,000,000 in profits when it pollutes a river,and it can abate pollution at a cost of $120,000.The effects of the pollution are confined to a single farmer who earns $400,000 if the water he uses from the river is clean,and $300,000 if it's polluted.Suppose the law guarantees the farmer access to clean water from the river.Which of the following describes an efficient outcome in this case?

• A) The owner of the mill is unable to pay the farmer enough to secure his permission to pollute the river.
• B) The farmer is unable to pay the owner of the mill enough to get him to stop polluting.
• C) The owner of the mill pays the farmer $110,000 for his permission to pollute the river.
• D) The farmer pays the owner of the mill $90,000 to stop polluting.

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