Posted by eStone on .
In a place rice growers burn their field to stabilize their fields the field burning causes pollution, the alternative sanitizing method costs $150 per acre. Consider a country where rice farmers are willing to pay $500 per acre for land and corn farmers (who do not sanitize their fields) are willing to pay $300 per acre. The total output of the country is small enough so that prices of rice and corn are unaffected by events in the country.
Suppose that field burning is outlawed, forcing rice farmers to switch to the alternative sanitizing method
(a). How does the field burning law affect rice consumers, corn consumers, farmers and land owners.
In other words, who bears the cost of the pollution control program?
(b) How would the answer to (a) change if the cost of the alternative method were $250 per acre?
How would the answer to (b) change if field burning were outlawed in the entire state of California?
Take a shot. What do you think?
Hint: what is the optimal use of the acre of land if rice farmers must pay $150 (or $250) to sanitize?