Assume that locating a cement factory in the middle of Boston would save the pro
ID: 1226959 • Letter: A
Question
Assume that locating a cement factory in the middle of Boston would save the producer $5 million at a public expense, in pollution and traffic noise, of $20 for each of 500,000 Boston residents. 1. What is the minimum amount that Boston residents would have to pay to stop the plant from being built if the owner has a legal right to build? $ million. 2. What is the minimum amount that the factory owner would have to pay Boston residents to build the plant if the city had a right to stop the building? $ million. 3. What proportion of Boston residents would have to contribute to a fund to stop the plant for that fund to stop construction? (assuming that each of these contributors would contribute the maximum amount that they might contribute) %
Explanation / Answer
1) The minimum amount that Boston residents would have to pay to stop the plant from being built if the owner has a legal right to build = $ 5 Million
2) The minimum amount that the factory owner would have to pay Boston residents to build the plant if the city had a right to stop the building = 20 * 500000 = 10000000 = $ 10 Million (10000000 / 10 )
3) The proportion of Boston residents that would have to contribute to a fund to stop the plant for that fund to stop construction = 10 Million / 15 Million = 0.6667 i.e., 66.67 %.