Practice according to the coase theorem

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Two firms are located on the shores of a small lake. Firm C is an industrial chicken grower, and firm B is a strawberry orchard. Firm C uses the lake to dispose of chicken waste, while firm B uses the water from the lake to wash the strawberries. The chicken waste in the water forces Firm B has to incur additional costs (damages) to purify water contaminated by chicken waste. Firm C has to incur additional costs to control its emissions of chicken waste by building holding pools. Use a graph to explain how the Coase Theorem would work in this case. Make sure you examine both possible allocations of property rights. Do you think a problem like this could be solved in practice according to the Coase Theorem? Explain why or why not

Reference no: EM131112415

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