Consider the case of externalities on a river used for recreation. Fishermen enjoy using the river to fish, but they catch more fish when the river is quiet. Speed boaters also enjoy using the river, but their loud boat engines scare most of the fish away, decreasing the fishermen’s enjoyment of the river. The following table gives the surplus to the fishermen and the surplus to the speed boater for each number of speed boats on the river:

Number of speed boats on the river	0	1	2	3
Fisherman Surplus	100	80	40	10
Speed boater Surplus	0	50	60	70
Total Surplus

3a. Fill in the total surplus row. What is the number of speed boats on the river that maximizes efficiency (total surplus)?

3b. Assume fishermen have the right to a quiet river, so there are currently zero-speed boats on the river. Can the fishermen and the speed boaters negotiate an agreement that makes both of them better off? Describe this arrangement. Calculate the surplus to the fishermen and the surplus to the speed boaters after the agreement is implemented.

3c. Now assume speed boaters have the right to boat as much as they want on the river, so there are currently three-speed boats on the river. Can the fishermen and the speed boaters negotiate an agreement that makes both of them better off? Describe this arrangement. Calculate the surplus to the fishermen and the surplus to the speed boaters after the agreement is implemented.

3d. Does it matter who owns the right to fish vs. the right to boat on the river? Will the equilibrium outcome change depend on who owns the rights? Does it change the total surplus? Does it change individual surplus for the fishermen or the boater?