Bob's Bee Emporium makes organic honey, which Bob sells at farmers' markets. The value of his Bee Emporium in its current location is $100,000. Unfortunately, Bob's bee's frequently fly to the neighboring property, Daisy's Daycare Center, and sting the small children, some of whom have allergic reaction to the bee stings. Daisy's Daycare Center business is worth $100,000, before the cost of treating any of the children, which the Daycare Center has to pay. The cost of treating the children for the bee stings is $15,000 per year. Relocating the Bee Emporium would reduce its value by $25,000. Relocating the Daycare Center would cost $10,000. The table below shows the value of the businesses under the above conditions. Daisy's Daycare Center Present Location Relocate Bob's Bee Emporium Present Location $85,000 $90,000 $100,000 $100,000 Relocate $100.000 $90,000 $75,000 $75.000 If there are no transaction costs to negotiate, which rule would Coase recommend for maximum economic efficiency? O Bee keeper's have the right to locate wherever they want without any liability O Daycare centers have the right to exist without the threat of bee stings O Bee keepers should have to pay for any damage done by their bees O Any of the above would be equally efficient
Bob's Bee Emporium makes organic honey, which Bob sells at farmers' markets. The value of his Bee Emporium in its current location is $100,000. Unfortunately, Bob's bee's frequently fly to the neighboring property, Daisy's Daycare Center, and sting the small children, some of whom have allergic reaction to the bee stings. Daisy's Daycare Center business is worth $100,000, before the cost of treating any of the children, which the Daycare Center has to pay. The cost of treating the children for the bee stings is $15,000 per year. Relocating the Bee Emporium would reduce its value by $25,000. Relocating the Daycare Center would cost $10,000. The table below shows the value of the businesses under the above conditions. Daisy's Daycare Center Present Location Relocate Bob's Bee Emporium Present Location $85,000 $90,000 $100,000 $100,000 Relocate $100.000 $90,000 $75,000 $75.000 If there are no transaction costs to negotiate, which rule would Coase recommend for maximum economic efficiency? O Bee keeper's have the right to locate wherever they want without any liability O Daycare centers have the right to exist without the threat of bee stings O Bee keepers should have to pay for any damage done by their bees O Any of the above would be equally efficient
Chapter1: Making Economics Decisions
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Transcribed Image Text:Bob's Bee Emporium makes organic honey, which Bob sells at farmers' markets. The value of his Bee Emporium in its current location is $100,000. Unfortunately, Bob's bee's frequently fly to the neighboring property, Daisy's Daycare Center, and sting
the small children, some of whom have allergic reaction to the bee stings. Daisy's Daycare Center business is worth $100,000, before the cost of treating any of the children, which the Daycare Center has to pay. The cost of treating the children for the
bee stings is $15,000 per year.
Relocating the Bee Emporium would reduce its value by S25,000. Relocating the Daycare Center would cost $10,000. The table below shows the value of the businesses under the above conditions.
Daisy's Daycare Center
Present Location
Relocate
Bob's Bee Emporium
Present Location
$85,000
$90.000
$100,000
$100,000
Relocate
$100,000
$90,000
S75,000
$75.000
If there are no transaction costs to negotiate, which rule would Coase recommend for maximum economic efficiency?
O Bee keeper's have the right to locate wherever they want without any liability
O Daycare centers have the right to exist without the threat of bee stings
O Bee keepers should have to pay for any damage done by their bees
O Any of the above would be equally efficient
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