Suppose a Paper Mill Earns $1,000,000 in Profits When It

Multiple Choice

Suppose a paper mill earns $1,000,000 in profits when it pollutes a river,and it can abate pollution at a cost of $75,000.The effects of the pollution are confined to a single farmer who earns $400,000 if the water he uses from the river is clean and $300,000 if it's polluted.Suppose there is no law preventing the firm from polluting the river.Which of the following describes an efficient outcome in this case?

A) The farmer is unable to pay the owner of the mill enough to get him to stop polluting.
B) The owner of the mill pays the farmer $87,500 in compensation for its pollution.
C) The farmer pays the owner of the mill $112,500 to stop polluting.
D) The farmer pays the owner of the mill $87,500 to stop polluting.