Final answer:
A pollution charge of $1,000 provides an incentive for a firm to reduce emissions if the abatement cost is lower, such as $300 to eliminate 10 pounds of pollution. Similarly, substantial charges for delinquent fees can encourage debtors to pay what they owe to avoid additional costs.
Step-by-step explanation:
If a pollution charge is set equal to $1,000, then a firm will have the financial incentive to reduce pollution. As shown in the scenario, if the cost to abate pollution (reduce emissions) is less than the charge for pollution, the firm will opt to invest in pollution abatement. For instance, if the firm faces a choice between paying a $1,000 fee for every 10 pounds of particulates emitted or paying $300 to eliminate the first 10 pounds of pollution, the firm will choose to abate the pollution because it is economically advantageous. The same principle applies for delinquent fees on payments such as with credit card companies; an initial charge and additional daily fees encourage prompt payment to avoid incurring higher costs.
In the context of the question, an estoppel likely refers to preventing someone from arguing that they do not owe delinquent fees once they have acknowledged them. If the charge for delinquent fees is substantial, then the debtor is likely to prioritize clearing the debt to avoid the fee, just as a firm would reduce pollution to avoid a pollution charge.