In 1908, Champion Paper Company built a major paper mill in Canton, North Carolina, and the paper-making process had the unfortunate result of turning the Pigeon River into dark, coffee-colored water. The Pigeon River flows into Tennessee and ultimately into the French Broad River, polluting it, too.

Because the mill employed more than a thousand people and paid union wages to workers both from North Carolina and Tennessee, the government of Tennessee permitted the mill to pollute Tennessee waters. However, in the late 1980s, the governor of Tennessee said he would require the mill to reduce its discharges because he believed the company could afford to do so. In his announcement, he said that since the company, which owns many paper mills in numerous states and countries, had earned many millions of dollars in profits overall, it could afford to spend the money necessary to reduce polluting discharges.

If we assume that Champion is a profit-maximizing firm, was the governor's reasoning correct, economically speaking? Why or why not? Please be specific in your answer.