What is the efficient solution for society

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Suppose a manufacturing firm dumps its waste into the river, causing pollution downstream where residents like to water ski and fish. The marginal external cost to the residents is $800 for their diminished recreational enjoyment. The marginal benefit to the firm of dumping the waste is $500, the amount of money they save by not having to haul the waste away.

What is the efficient solution for society: for the firms to have the right to dump the waste, or for the residents to have the right to clean water? Tell 2 stories about how the efficient outcome would be negotiated between both parties, regardless of who ultimately is awarded the property rights.

Reference no: EM131091302

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