Suppose a paper mill earns $1,000,000 in profits when it pollutes a river,and it can abate pollution at a cost of $A.The effects of the pollution are confined to a single farmer who earns $400,000 if the water he uses from the river is clean and $300,000 if it's polluted.What is the combined profit of both firms without abatement?
A) $1,300,000
B) $900,000
C) $700,000
D) $1,400,000

Question

Quizplus · Accepted Answer

Without abatement, the paper mill earns $1,000,000, and the farmer earns $300,000 due to the pollution, totaling $1,300,000.

Suppose a Paper Mill Earns $1,000,000 in Profits When It