10. Jones and Smith are neighbors. Jones runs a marijuana shop out of his home. Smith, a doctor, sees patients at his home. Jones makes an annual profit of $1 million from operating his marijuana business. Smith earns $750,000 annually from his medical practice, but he would earn $2 million without the disruption caused by Jones' marijuana selling activities. (a) Suppose the law imposes no restriction on what a homeowner may do in his home. What would the outcome be, as predicted by Coase? (b) Suppose the law requires that one's neighbors consent to what a homeowner does in his home. What would the outcome be, as predicted by Coase? (c) How optimal would the outcome be in (a) and (b)?

10. Jones and Smith are neighbors. Jones runs a marijuana shop out of his home. Smith, a doctor, sees patients at his home. Jones makes an annual profit of $1 million from operating his marijuana business. Smith earns $750,000 annually from his medical practice, but he would earn $2 million without the disruption caused by Jones' marijuana selling activities. (a) Suppose the law imposes no restriction on what a homeowner may do in his home. What would the outcome be, as predicted by Coase? (b) Suppose the law requires that one's neighbors consent to what a homeowner does in his home. What would the outcome be, as predicted by Coase? (c) How optimal would the outcome be in (a) and (b)?

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter12: Environmental Protection And Negative Externalities

Section: Chapter Questions

Problem 11SCQ: The state of Colorado requires oil and gas companies who use fracking techniques to retune the land...

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The state of Colorado requires oil and gas companies who use fracking techniques to retune the land to its original condition after the oil and gas extractions. Table 12.9 shows the total cost and total benefits (in dollars) of this policy. Calculate the marginal cost and the marginal benefit at each quantity (acre) of land restored. See Production. Costs and Industry Structure if you need a refresher on how to calculate marginal costs and benefits. If we apply marginal analysis, what is the optimal amount of land to be restored?
Becky and Sarah are sisters 1who share a room. Their room can easily get messy, and their parents am always telling them to tidy it. Here are the costs and benefits to both Becky and Sarah, of taking the time to clean their room: If both Becky and Sarah clean, they each spends two hours and get a clean room. If Becky decides not to clean and Sarah does all the cleaning, then Sarah spends 10 hours cleaning (Becky spends 0) but Sarah is exhausted. The same would occur for Becky if Sarah decided not to cleanâ€”Becky spends 10 hours and becomes exhausted. If both girls decide not to clean, they both have a dirty room. What is the best outcome for Becky and Sarah? What is the worst outcome? (It would help you to construct a prisoners dilemma table.) Unfortunately, we know that the optimal outcome will most liker not happen, and that the sisters probably will choose the worst one instead. Explain what it is about Beckys and Sarahs reasoning that will lead them both to choose the worst outcome.
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8. The effects of property rights on achieving efficiency Consider a lake found in the village of Sturbridge, and then answer the questions that follow. The village has a boat tour whose visitors use the lake for recreation. The village also has a fish processor that dumps industrial waste into the lake. This pollutes the lake and makes it a less desirable vacation destination. That is, the fish processor's waste decreases the boat tour's economic profit. Suppose that the fish processor could use a different production method that involves recycling water. This would reduce the pollution in the lake to levels safe for recreation, and the boat tour would no longer be affected. If the fish processor uses the recycling method, then the fish processor's economic profit is $1,300 per week, and the boat tour's economic profit is $1,900 per week. If the fish processor does not use the recycling method, then the fish processor's economic profit is $1,600 per week, and the boat…
1. How can a government encourage investment in a specific technology via the tax laws ? ( for example , information technology , sustainability , or environmental protection )
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