Suppose that a food processing plant and a chemical factory are located close to each

other on the banks of a river. The chemical factory uses the river to discharge its

emissions. The food processing plant (located somewhere downstream) suffers

damages from the emissions as it requires clean water for its operations. Assuming

MAC = 240-2E and MD = 3E, answer the following questions. Draw this diagram before

answering the questions below. You will be asked to upload the diagram at the end of

this assignment.

1. If the chemical factory has the right to use the river ( or has the property right,

(i) what amount of emissions is it likely to choose when there is no bargaining yet?

(ii) what amount of emissions is it likely to choose when they reach a bargaining

equilibrium?

(iii) what is the net gain to the chemical factory in the bargaining equilibrium ( i.e from

bargaining compared to the situation where they do not bargain)? Remember net

gain/benefit means total benefits - total costs.

(iv) what is the net gain to the food processing plant in the bargaining equilibrium ( i.e

from bargaining compared to the situation where they do not bargain)? Remember net

gain/benefit means total benefits - total costs.

1)

Manufacturers of laundry detergent and dishwashing soap reinvest a relatively large

percentage of their sales revenues on advertising campaigns.

Most of these advertisements that appear on television stress the fact that their

product is "New and Improved.

" Why? Please give an explanation and include a discussion of the type of market

(perfect competition, monopoly, monopolistic competition, oligopoly) this might be.

2)

A Wholesale Distributor, Fish Ltd, is a public corporation and has taxable income of

$400,000 for the year. What is Fish Ltd's federal tax payable for the year?

a.51,000

b.64,000

c.116,000

d.70,000

Canada

3)

Give an example of a government-created monopoly. Is creating this monopoly

necessarily bad public policy?

Define natural monopoly.

What does the size of a market have to do with whether an industry is a natural

monopoly?

Why is a monopolist's marginal revenue less than the price of its good?

Can marginal revenue ever be negative?

Explain.