Assume a wetland near a large metropolitan area is able to filter 1,250 tons of pollutants per year from water discharges. The following schedule shows the price polluters would be willing to pay for the right to discharge 1 ton of pollutants per year and the total quantity of pollutants they would wish to dispose of at each price. Price (per ton of pollutant rights) Total Quantity of Pollution Rights Demanded (tons)
$0 2,250
500 2,000
1,000 1,750
1,500 1,500
2,000 1,250
2,500 1,000
3,000 750
3,500 500
Instructions: Enter all values as whole numbers.
a) If there were no discharge fee, polluters would put tons of pollutants in the wetland each year, and this quantity of pollutants would exceed the ability of nature to filter them by 4 tons.
b) To reduce pollution to the capacity of the wetland to filter pollutants, a discharge fee of per ton should be set.
c) Were this dishcarge fee set, the total fees collected would be $
d) Were the quantity of pollution rights demanded at each price to increase by 500 tons, the discharge fee could be increased by $ and total discharge fees collected would increase by