24 Four firms located at different points on a river dump va

24. Four firms located at different points on a river dump various quantities of effluent into it. The effluent adversely affects the number of fish available for harvesting downstream. Fishermen can consider working in other activities (such as factory labourers), and firms can purchase filters that eliminate harmful chemicals in the material dumped in the river. Describe and evaluate the following options for dealing with the harmful effect of the effluent: a. An equal-rate effluent fee on firms located on the river. (5 marks) b. An equal standard per firm on the level of effluent that each can dump. (5 marks) c. A transferable effluent permit system in which the aggregate level of effluent is fixed and all firms receive identical permits. (5 marks)

Solution

Solution-

An equal-rate effluent fee on firms located on the river.

First, one needs to know the value of homeowners swimming in the river.Getting information can be difficult, because homeowners will have a promotion Overstate this value.So one On the upper border, if there is no other consideration than others Swimming pool, one can spend swimming pool building, each one Public pool for homeowner or all homeowners.Next, one needs to know the marginal cost of abatement.If abatement technology is well understood, this information must be available immediately.If you do not understand the meanings of technology, it is necessary to use an estimate based on the company\'s knowledge.The choice of policy instrument will depend on limited benefits and adverse costs.If the companies have levied a similar rate stream, then companies will make a significant reduction to that point where the marginal price fee is the same for reducing the fee.If this reduction is nothigh enough to permit swimming, the fee could be increased.Alternatively, revenue from the fee can be used to provide swimming facilities, to reduce the need to reduce swimming pools.

An equal standard per firm on the level of effluent that each can dump.

If the standard is only efficient, then the policy maker has complete information about the retail cost and the scalability, so that the standard performance level can be fixed.Moreover, new filtering technology will not encourage to reduce standard forms when available.

A transferable effluent permit system in which the aggregate level of effluent is fixed and all firms receive identical permits.

A transferable effluent permit system is required to formulate a strategy to ensure effective flow sections.After the licenses are delivered and after the market is developed, companies with deficiencies will buy licenses from companies with low cost.However, no income will be generated for the regional organization unless sold instead of delivering returns.