On the banks of the Great Fish River sit an oil refinery and a paper mill. Both

Question

On the banks of the Great Fish River sit an oil refinery and a paper mill. Both generate a water pollutant called gunk that kills fish, reducing the profits of local fishing boats. But it is costly for the mill and the refinery to clean-up. The Environment Ministry needs to step in with a solution. The table below shows the marginal and total costs to the polluters for clean-up, and also show the marginal and total benefits of clean-up to the fishing community.

There is one trick to reading this table. Recognize that the fishers’ profits are a function of the total pollution in the system (gunk produced by both the mill and the refinery), while the table shows the clean-up costs to each polluter as a function only of their own waste.

What is the marginal cost to the refinery of cleaning up from 5 to 4? For the mill of cleaning up from 5 to 4? If both the refinery and the mill are at 5, then what is the benefit to the fishers of the refinery cleaning up to 4? (10 points)

GUNK Emitted (tons/day) Total Marginal Total Marginal Tota Marginal OIL REFINERY Costs of Reduction FISHERS Profit from Reduction PAPER MILL Costs of Reduction 1 2 3 4 5 6 7 8 9 10 $66.70 $16.70 $40.00 $26.70 $197.00 $50.00 $10.00 $13.30 $5.30 $196.30 $40.00 $6.70 $33.30 $4.80 $28.60 $3.60 $25.00 $2.80 $22.20 $2.20 $20.00 $1.80 $18.20 $1.50 $16.70 $1.30 $15.40 $8.00 $2.30$195.30 $5.70 $1.30 $194.20 $4.40 $0.80 $192.80 $3.60 $0.60 $191.00 $3.10 $0.40 $188.80 $2.70$0.30 $186.00 $2.40 $0.20$182.60 $2.10 $0.20$178.30 $1.90 $0.70 $0.90 $1.10 $1.40 $1.80 $2.20 $2.80 $3.40 $4.30 $5.30 $6.70 $172.90

Explanation / Answer

The marginal cost for the refinery is $0.80, the mill would be $0.20. the benefit for the fishers will be $0.60.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.