3. Environmental Crime and Punishment Economists tend to view the decision by an individual to comply with an environmental law in terms of economic motivations. While good citizenshipobeying the law simply because it is the lawcertame plays a role in affecting behavior, it is also useful to analyze compliance decisions in terms of benets and costs. The Figure below illustrates a hypothetical marginal costmarginal benet analysis for a manager in a coal-red power plant who has to decide what percentage of the time she plans to be in compliance with the sulfur dioxide emission standards on her state permit. Marginal costs Marginal benets 0f compilanoe of compliance 0 0* 100 '56 hours in compliance per year FIGURE 14.3 The Private Compliance Decision The benets that come om complying with environmental laws are essentially the avoided costs of punishment: monetary costs (nes and penalties), a damaged reputation (both for corporations and individuals), and the fear of jail terms. The expected benets depend upon two factors: the magnitude of the punishment if imposed and the likelihood of getting caught and convicted. The costs of compliance, on the other hand, are simply the additional outlays needed to install, service, and maintain pollution-control equipment and complete the relevant paperwork. (1). Why are the marginal benets of compliance high at low compliance rates? Why are they low at high compliance rates? (2). Why are the marginal costs of compliance high at high compliance rates? (3). Over one seven-year period, Weyerhaeusera major international paper companyracked up 122 penalized violations at its three Washington State plants, paying $721,000 in nes, bargained down om an initial $1 million. \"In many cases, Weyerhaeuser continued over the years to illegally discharge the same pollutant into the same waterway . . . paying the fine with little protest.">16 Based on a model like that in the Figure above, would you conclude that, as it repeatedly paid fines, Weyerhauser was taking no steps to clean up its operations? (4). Here are two hard ones. The EPA officially supports a policy of setting fines to eliminate all monetary gain from noncompliance with regulations. Assume that any violation by a firm will be detected with certainty. In this case, try to figure out what the MB curve of compliance in the figure above looks like under the EPA's recommended policy. (The MC curve stays the same.) Will the plant manager choose full compliance? (5). In the real world, detection does not occur with certainty. In this case, will the manager choose full compliance under the EPA policy