Question

A fishery and a Chemical Company are both operating on the river.

Marginal Abatement Cost is MAC = 90 – E and Marginal Damages is MD = 30 + 2E, where E is measured in tonnes.

19) Suppose the Chemical Company owns the river. Begin by assuming there has not been any agreement. The Fishery offers the Chemical Company $50 per tonne of abatement, and the Chemical Company agrees. What will be resulting Net Social Benefit (NSB) of the agreement?

a) 7200

b) 7050

c) 6900

d) 6750

e) 6600

Answer 1