+1-415-670-9189
info@expertsmind.com
Describe a coasian solution to the externality problem
Course:- Macroeconomics
Reference No.:- EM13179066




Assignment Help
Assignment Help >> Macroeconomics

A paint factory produces paints, but in the process transmits chemicals into the soil below the factory. These chemicals taint the soil such that the farmer whose land abuts the paint factory property experiences a reduction in soil quality and hence crop output. Assume the paint company's marginal benefit (demand) curve for its output is the following:

300-Q. It's marginal cost of producing is as follows: MC = 20 + Q. The farmer experiences a reduction in farm profit that can be described with the following Marginal Damage curve: MD = 40 + 2Q.

1. What output level does the paint company choose?

2. What is the socially optimal level of output?

3. Describe a possible Coasian solution to the externality problem.

4. What corrective tax could the government set to achieve the socially optimal level of output from the paint company?




Put your comment
 
Minimize


Ask Question & Get Answers from Experts
Browse some more (Macroeconomics) Materials
Some college students work only during the summer months because they feel they cannot work and attend school simultaneously. According to the U.S. labor department, during
Consider a seller who values a car at $9,500 and a buyer who values the same care at $10,000. What total surplus will result from a transaction between the two when the seller
In late 2010 economists were debating whether the U.S. economy was in a recession. GDP seemed to be rising, yet the unemployment rate was stuck at close to 10 percent. In thin
Comprehensively distinguish between expansionary and restrictive fiscal policy. Is the current fiscal policy stance in SA expansionary or restrictive? Motivate your answer com
Write an essay that describes the preparation required for an effective virtual meeting. What are the key things that  a facilitator need to do to keep the meeting on track.
In 1994 during the debate over national health insurance, First Lady Hillary Clinton accused insurance companies of "making profits at the expense of their customers." Do y
Is it true that rich people hold more money than poor people do Do rich people hold a higher percent of their income as money than poor people Compared to an income tax, does
Examination of the company for which you are currently working (or a company with which you are familiar). Answer the following questions regarding this company.