Coase Theorem: There is 1 firm (polluter) and 1 household (pollution victim). The firm incurs all...
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Coase Theorem: There is 1 firm (polluter) and 1 household (pollution victim). The firm incurs all abatement costs, and the household incurs all damages from pollution. Society faces a choice between "low", "medium" and "high" emissions, with the following abatement costs and damages. (Hint: review Lecture 12 and make sure you understand it thoroughly) All numbers in thousands of dollars Emissions Abatement Costs Damages Low 12 Medium 6 High 0 0 8 20 What is the socially efficient level of emissions? (b) Suppose the firms owns the right to pollute, and transaction costs are infinitely high. What level of emissions will the firm choose? Is this outcome socially efficient? (c) Suppose transaction costs were zero, and the firm owned the right to pollute. Will the firm and household reach an agreement over the level of emissions? If so: (i) what level of emissions will they negotiate (ii) what is the maximum price the household is willing to pay the firm (iii) what is the minimum possible price the firm is willing to accept? (d) Suppose the household owns the right to pollute, and transaction costs are infinitely high. What level of emissions will the household choose? Is this outcome socially efficient? (e) Suppose transaction costs were zero, and the household owned the right to pollute. Will the firm and household reach an agreement over the level of emissions? If so: (i) what level of emissions will they negotiate (ii) what is the maximum price the firm is willing to pay the household (iii) what is the minimum possible price the household is willing to accept? Coase Theorem: There is 1 firm (polluter) and 1 household (pollution victim). The firm incurs all abatement costs, and the household incurs all damages from pollution. Society faces a choice between "low", "medium" and "high" emissions, with the following abatement costs and damages. (Hint: review Lecture 12 and make sure you understand it thoroughly) All numbers in thousands of dollars Emissions Abatement Costs Damages Low 12 Medium 6 High 0 0 8 20 What is the socially efficient level of emissions? (b) Suppose the firms owns the right to pollute, and transaction costs are infinitely high. What level of emissions will the firm choose? Is this outcome socially efficient? (c) Suppose transaction costs were zero, and the firm owned the right to pollute. Will the firm and household reach an agreement over the level of emissions? If so: (i) what level of emissions will they negotiate (ii) what is the maximum price the household is willing to pay the firm (iii) what is the minimum possible price the firm is willing to accept? (d) Suppose the household owns the right to pollute, and transaction costs are infinitely high. What level of emissions will the household choose? Is this outcome socially efficient? (e) Suppose transaction costs were zero, and the household owned the right to pollute. Will the firm and household reach an agreement over the level of emissions? If so: (i) what level of emissions will they negotiate (ii) what is the maximum price the firm is willing to pay the household (iii) what is the minimum possible price the household is willing to accept?
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a The socially efficient level of emissions is Low since it incurs the lowest combined costs of abat... View the full answer
Related Book For
Chemistry The Central Science
ISBN: 978-0321696724
12th edition
Authors: Theodore Brown, Eugene LeMay, Bruce Bursten, Catherine Murphy, Patrick Woodward
Posted Date:
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