Coase v/s Pigou) A chemical factory is situated next to a farm. Airborne emissions from the chemical factory damage crops on the farm. The marginal benefits of emissions to the factory and the marginal costs of damage to the farm are summarized in the table below: Emissions Marginal Benefit for Factory Marginal Cost to Farmer 70 80 90 100 110 120 130 140 150 160 270 100 200 300 400 500 600 700 800 900 a. Graph the marginat benefit and marginal cost curves, assuming that costs and benefits are linear between the points on the table. 240 210 180 150 120 90 60 30 a. What level of emissions would the chemical factory produce if it could ignore the effects of its pollution on farmers? Indicate both graphically and numerically. What level of chemical emissions would the farmer prefer? Indicate both graphically and numerically. a. What is the socially optimal level of emissions? How would Pigou solve this environmental conflict of interest? Be specific, providing numeric values where appropriate. a. How would Coase solve this environmental conflict of interest? Label your graph with alphabets and explain Coasian bargaining in the two possible situations here. a.

Coase v/s Pigou) A chemical factory is situated next to a farm. Airborne emissions from the chemical factory damage crops on the farm. The marginal benefits of emissions to the factory and the marginal costs of damage to the farm are summarized in the table below: Emissions Marginal Benefit for Factory Marginal Cost to Farmer 70 80 90 100 110 120 130 140 150 160 270 100 200 300 400 500 600 700 800 900 a. Graph the marginat benefit and marginal cost curves, assuming that costs and benefits are linear between the points on the table. 240 210 180 150 120 90 60 30 a. What level of emissions would the chemical factory produce if it could ignore the effects of its pollution on farmers? Indicate both graphically and numerically. What level of chemical emissions would the farmer prefer? Indicate both graphically and numerically. a. What is the socially optimal level of emissions? How would Pigou solve this environmental conflict of interest? Be specific, providing numeric values where appropriate. a. How would Coase solve this environmental conflict of interest? Label your graph with alphabets and explain Coasian bargaining in the two possible situations here. a.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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