Business, 21.11.2019 21:31, vale4287

Alocal town is under pressure from voters to close a polluting factory. the head of the homeowner’s organization argues that the pollution is a menace, and if the full external costs of the pollution were included, the factory would be profitable. the homeowners calculate that the pollution generates an external cost of $3,000,000 per year in medical bills and $1,000,000 per year in suppressed property values (the difference in home prices with and without the pollution). the factory, on its books, makes a profit of $5,000,000 per year. i.what is the external cost of the pollution? ii. if the factory is forced to consider the total social costs of pollution, would it be profitable? iii. how much could the town tax the factory before profits become zero? iv. what does the coase theorem suggest about negotiations between the town and the factory?

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Alocal town is under pressure from voters to close a polluting factory. the head of the homeowner’s...