Two farms are located next to each other. During storms, sewage from Farm 1 flows into a
Question:
a) Provide an argument that the Coase Theorem holds in this situation.
b) Suppose that the damage to Farm 2 is $500,000 per year, not $100,000 per year (with the cost of storm drains remaining fixed at $200,000). Provide an argument that the Coase Theorem holds in this case.
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