A. If the chemical firm ignores the external costs it imposes on the hatchery, it willproduce 4 tons of emissions per day.B. If transactions costs are high and the chemical firm has the right to pollute, it willproduce 4 tons of emissions per day.C. If transactions costs are zero and the chemical firm has the right to pollute, thehatchery will pay the chemical firm approximately $40 for each ton of emissionsreduced and the chemical firm will emit 4 tons per day.D. If transactions costs are zero and the hatchery has the right to clean water, thechemicals firm will not produce any emissions.O E. None of the above. The figure shows the marginal social cost and marginal social benefit curves for achemical producing firm operating upstream from a hatchery. Which of thefollowing is true according to the Coase Theorem?MSC, MSB($/ton)100MSC90806A706050403아20-MSB10B.5.7.10Quantity of Emissions (tons per day)***

Coase theorem was give by the noble price winner Ronald Coase, which states that externality will automatically be internalized by negotiations, between parties involved without government interference. However there are certain assumptions that must be met: There should be few parties in the negotiations The cost of negotiations should be as low as possible Property rights should be clearly establishedBased on the assumptions of the Coase theorem, the negotiations between the chemical firm and hatchery when the property rights with chemical firm will cause the chemical firm to produce at the social optimum where the MSB = MSC where the chemical firm will produce 4 tons of chemical per day and will be paid $10 by the hatchery to reduce each ton of emission reduced Thus the correct option is E none of the above.

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The figure shows the marginal social cost and marginal social benefit curves for a chemical producing firm operating upstream from a hatchery. Which of the following is true according to the Coase Theorem? MSC, MSB ($/ton) 100 MSC 90 80 A 7아 60 50- 40 3아 2아 MSB 10- 6. 6. 10 Quantity of Emissions (tons per day)

The figure shows the marginal social cost and marginal social benefit curves for a chemical producing firm operating upstream from a hatchery. Which of the following is true according to the Coase Theorem? MSC, MSB ($/ton) 100 MSC 90 80 A 7아 60 50- 40 3아 2아 MSB 10- 6. 6. 10 Quantity of Emissions (tons per day)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The figure above shows the marginal social cost and marginal social benefit curves for a chemical producing firm operating upstream from a hatchery. If the government imposes a $40 tax per ton of emissions, which of the following is true? MSC, MSB ($/ton) 100 MSC 90 80A 70 60 50 40 30 20 MSB 10 B. 1. 4. 10 Quantity of Emissions (tons per day)
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