discovered that production of painclear damages groundwater quality – this affects just one party: Greenview Nature Park (a park run by the local council which people can access, for free, for recreation). The value of the damage caused is £48 per litre of paint produced – so the pollution damage caused when output is 1 litre=£48, the 2 nd litre causes another £48 of damage, so
It is discovered that production of painclear damages groundwater quality – this affects just one party: Greenview Nature Park (a park run by the local council which people can access, for free, for recreation). The value of the damage caused is £48 per litre of paint produced – so the pollution damage caused when output is 1 litre=£48, the 2 nd litre causes another £48 of damage, so pollution damage caused when output is 2 litres=£96. This damage happens and is the same whenever XY produces, whatever the level of output (same if it produces 1 litre of or 1 000 000 litres of painclear - each additional litre imposes an additional £48 of pollution costs). The drug has no side effects on consumers. (the clarifying information in red was added on 21/12/23)
1.Create and explain a new diagram which shows relevant costs, price and levels of output if XY produced the optimal quantity of painclear from a societal perspective.
2. Assume XY and Greenview can negotiate. Create and explain 2 new diagrams which show the positions which may result if negotiations go perfectly (from an economic perspective) if: • Greenview has the Property Rights • XY has the Property Rights.
3. What factors in the real world affect the likelihood that these outcomes will be achieved?
4. Will the public care as to which of them has the property rights – explain your answer?
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