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angie0000
angie0000
24.06.2019 • 
Business

Suppose the marginal damage and marginal benefit curves in a polluted neighborhood are md = p/3 and mb = 4 – p. also, suppose that transactions costs are low, so that the consumers and the firm can bargain. we saw that in this case, the socially-optimal level of pollution is achieved. start by computing the socially-optimal p. then, for each of the following cases, compute the amount of money transferred through the bargaining process, and indicate who pays whom (i.e., whether consumers pay the firm, or vice versa). also, compute the gains to each party relative to the status quo (i.e., the starting point of the bargaining process). a) consumers have the right to clean air; firm is dominant in the bargaining process. b) consumers have the right to clean air; consumers are dominant in the bargaining process. c) firm has the right to pollute; firm is dominant in the bargaining process. d) firm has the right to pollute; consumers are dominant in the bargaining process.

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