Question 1

A new paint factory has opened in Cranbourne creating jobs for local residents however it is built on the edge a park used for recreational activities. The park also has a lake at its centre which attracts native fauna. Affluent from the factory creates a pungent smell and leaches into the ground affecting both flora and fauna in the park and lake. You are a consultant who has been hired by the City of Casey council to provide advise on dealing with the problem. The following data has been collected by you on the costs and benefits of pollution reduction measures.

Table 1 Annual Annual Damage Marginal Benefit of Annual Cost of Marginal Cost of tonnes of from pollution pollution reduction pollution reduction pollution reduction emissions ($) measures measures measures ($) ($) ($) 8 $700,000 SO 7 $535,000 $37,000 6 $400,000 $87,000 5 $310,000 $150,000 4 $230,000 $230,000 3 $170,000 $360,000 2 $115,000 $560,000 1 $96,000 $765,000 0 $998,000Figure 2 Price of education S (PMC) P1 D(PMB) 0 Q1 Quantity of Education