Refer to Pollutants. Suppose transactions costs preclude the possibility of private bargaining between the chemical plant and the farm. Which liability rule will not result in an efficient outcome?
A chemical plant's production adds pollutants to a stream which irrigates a farm's crops. The pollutants damage the farm's crops, increasing the firm's costs by $800 per month. The crop damage may be eliminated in two ways: the chemical plant can install a new filtering system costing $300 per month, or the farm can install a new irrigation system costing $600 per month.
a. The chemical plant bears all liability for the crop damage.
b. The farm bears all of the costs of the crop damage.
c. The chemical plant bears 50% of the liability, while the farm bears the other 50% of the crop damages.
d. The Coase Theorem guarantees that any assignment of liability will result in an efficient outcome.
b. The farm bears all of the costs of the crop damage.
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Suppose you purchase a two-year bond that has a $450 coupon and a face value of $5,000, and immediately after you purchase the bond, new bonds are issued that are otherwise identical, except they have coupons of $375
If you sell your bond, the price of your bond will be A) $4,868.07. B) $5,000.00. C) $5,069.76. D) $5,134.67.
A monopsony is an example of:
A. a buyer holding market power. B. a seller holding market power. C. an efficient market with no market power. D. a single seller holding all market power.