7. It's the standard Coasian bargaining question. Imagine there's a coyote rancher and a famer raising com. From time to time the coyotes get into the com and eat some of it. To be more specific, imagine that this relationship looks like the following: Marginal Marginal private cost com loss $ 50 S 75 # of Coyotes $100 2 $200 3 $300 $100 4. $400 $125 5 $500 $150 6. $600 $175 People who don't like having visitors might want a coyote as a pet, and the prevailing market price for a coyote is $425. A. Based on the numbers above, how many coyotes would the rancher like to raise? B. Based on the numbers above, what is the socially optimal or the efficient number of coyotes? C. Imagine that the farmer bribes the rancher to move from the profit maximizing to the efficient number of coyotes. Into what range would this payment fall? |

7. It's the standard Coasian bargaining question. Imagine there's a coyote rancher and a famer raising com. From time to time the coyotes get into the com and eat some of it. To be more specific, imagine that this relationship looks like the following: Marginal Marginal private cost com loss $ 50 S 75 # of Coyotes $100 2 $200 3 $300 $100 4. $400 $125 5 $500 $150 6. $600 $175 People who don't like having visitors might want a coyote as a pet, and the prevailing market price for a coyote is $425. A. Based on the numbers above, how many coyotes would the rancher like to raise? B. Based on the numbers above, what is the socially optimal or the efficient number of coyotes? C. Imagine that the farmer bribes the rancher to move from the profit maximizing to the efficient number of coyotes. Into what range would this payment fall? |

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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QUESTION 10 Suppose that a firm in a competitive market produces electricity by burning coal. The production process creates a negative externality of air pollution. The firm only cares about its private benefits and costs so it will produce a quantity where O the price of electricity it is paid equals the marginal private cost of producing electricity O the marginal value of electricity to society equals the marginal social cost to society the cost of the externality is maximized O the transaction costs of private bargaining are minimized
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