Consider the perfectly competitive market for greenhouse vegetables. The supply and demand equations are given as follows:
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Consider the perfectly competitive market for greenhouse vegetables. The supply and demand equations are given as follows: QS P QD P
Suppose that the production of greenhouse vegetables causes the greenhouse gases to be released which increases the temperature of a nearby mountainous area where there is a ski resort. Due to the increased temperature the ski resort does not have enough snow and has to use fake snow which costs the resort $ per one unit of vegetable produced by the greenhouse.
a Draw the supply and demand curves and find the market quantity and price
What type of externality does this market exhibit? Why?
Suppose all the assumptions of the Coase Theorem holds, and the property rights of the area belongs to the ski resort.
Propose a compensation scheme that will correct the externality.
Suppose the assumptions of the Coase Theorem doesn"t hold.
Related Book For
Principles Of Econometrics
ISBN: 9781118452271
5th Edition
Authors: R Carter Hill, William E Griffiths, Guay C Lim
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