Economic Analysis of Social Issues 1st Edition by Alan Grant

Exercise 5

Suppose that a brewer regularly dumps used yeast into a river and that a downstream water bottler must clean up the water before using it. Dumping the yeast into the river saves the brewer $500 in disposal costs each day. Cleaning up the water costs the bottler $600 each day. In this case, the benevolent social planner would _________.
A) Like to see the brewer pollute
B) Like to see the brewer dispose of the yeast somewhere other than the river
C) Strongly encourage the government to pass a law giving the brewer the right to pollute the river
D) We don't have enough information to determine what the benevolent social planner might want.