Assignment

Question 1

Suppose that the factory initially has the right to pollute. According to the Coase Theorem, if property rights are clearly defined and transaction costs are negligible, what would be the outcome? (Choose the best answer)

A. The factory will pollute at the maximum level of 10 tons of emissions
B. The factory will emit 10 tons of pollution because the total benefit is the greatest
C. The factory will pollute 10 tons of emissions, and the farmer will pay the factory owner $700 to stop all pollution
D. The farmer will pay the factory owner to pollute less in order to reduce the costs of crop damage.

Question 2

The efficient quantity of emissions will be ____ tons. (Use your graph and table identify)

Question 3

At the efficient level of pollution, the price per ton of emissions will be $____. Use your graph to identify the price. (Please do not include or commas in you response)

Hint: Recall that the marginal values tell us the per ton of emissions.

Question 4

At the efficient level of pollution reduction, the total benefits to the "community" (i.e., the factory and the farmer) will be $ the net benefits to the community will be $_____ .

Hint: Total benefits includes benefits from pollution and payments, but does not include costs; while net benefits includes costs.

Question 5

If the farmer has the property right to clean air, instead of the factory having the right to pollute, the outcome will be...
(Choose the best answer.)

A. The farmer will pay the factory less than the amount in Question 3

B. The price will stay the same, the level of pollution will decrease

C. The factory will pay the farmer the amount in Question 3 for each ton of pollution emitted, and the efficient quantity of emissions will be the same

D. The price will increase, the level of pollution will stay the same.

Attachment:- Table.rar