Refer to the figure below. Private markets will provide units of this good per day, and the socially optimal number of units per day is Social MC Private MC Demand Quantity (units/day) Multiple Cholce H; F H; G F; G G; F Price ($/unit)

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Refer to the figure below. Private markets will provide
units of this good per day, and the socially optimal number of units per day is
Social MC Private MC
B
Demand
Quantity (units/day)
Multiple Cholce
Н: F
H; G
F; G
G; F
Price ($/unit)
Transcribed Image Text:Refer to the figure below. Private markets will provide units of this good per day, and the socially optimal number of units per day is Social MC Private MC B Demand Quantity (units/day) Multiple Cholce Н: F H; G F; G G; F Price ($/unit)
Lakeview Spa and Shoreline Industries are both situated along the banks of Lake Dreary. Unfortunately for the owners of the Lakeview
Spa, Shoreline Industries regularly dumps garbage into the lake, polluting the lake and negatively impacting Lakeview Spa's profits.
The following table shows the firms' weekly profits when Shoreline Industries does and does not dump garbage into the lake.
Does not dump garbage
Dumps garbage
$1,100/week
$400/week
Shoreline Industries
$1,000/week
Lakeview Spa
$600/week
a. If Shoreline Industries has the legal right to dump garbage into the lake, and Shoreline Industries and Lakeview Spa can negotiate
with one another at no cost, then will Shoreline Industries dump garbage into the lake?
O Shoreline Industries will not dump garbage into the lake.
O Shoreline Industries will dump garbage into the lake.
Is this outcome socially efficient?
O No.
O Yes.
b. If Shoreline Industries has the legal right to dump garbage into the lake, and it costs Lakeview Spa $120 per week to negotiate with
Shoreline Industries, then will Shoreline Industries dump garbage into the lake?
O Shoreline Industries will not dump garbage into the lake.
O Shoreline Industries will dump garbage into the lake.
Is this outcome socially efficient?
O No.
O Yes.
Transcribed Image Text:Lakeview Spa and Shoreline Industries are both situated along the banks of Lake Dreary. Unfortunately for the owners of the Lakeview Spa, Shoreline Industries regularly dumps garbage into the lake, polluting the lake and negatively impacting Lakeview Spa's profits. The following table shows the firms' weekly profits when Shoreline Industries does and does not dump garbage into the lake. Does not dump garbage Dumps garbage $1,100/week $400/week Shoreline Industries $1,000/week Lakeview Spa $600/week a. If Shoreline Industries has the legal right to dump garbage into the lake, and Shoreline Industries and Lakeview Spa can negotiate with one another at no cost, then will Shoreline Industries dump garbage into the lake? O Shoreline Industries will not dump garbage into the lake. O Shoreline Industries will dump garbage into the lake. Is this outcome socially efficient? O No. O Yes. b. If Shoreline Industries has the legal right to dump garbage into the lake, and it costs Lakeview Spa $120 per week to negotiate with Shoreline Industries, then will Shoreline Industries dump garbage into the lake? O Shoreline Industries will not dump garbage into the lake. O Shoreline Industries will dump garbage into the lake. Is this outcome socially efficient? O No. O Yes.
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