What does the coase theorem say about the case

Assignment Help Microeconomics

Reference no: EM132200767

Question: Quantity | Total Private Benefit | Total External Damage | Total Private Cost

1 | 12 | 2 | 8

2 | 20 | 4 | 10

3 | 24 | 6 | 11

4 | 26 | 8 | 12

5 | 28 | 10 | 13

First column: output of an activity undertaken by person 1.

Second column: total benefit for person 1.

Third column total damage to person 2.

Fourth column: total private cost to person 1.

(a) What is the optimal choice for person 1 if he does not take into account the damage to person 2?

(b) What is the socially optimal choice that sums the welfare of the two individuals?

(d) What does the Coase theorem say about the case in which player 1 isnot liable for damages? Specifically, how does output compare to part (c)?

(e) Does your answer to part (d) imply that person 2 is worse, or better off (or just as well off) when player 1 is not liable for damages than when he is liable?

Reference no: EM132200767

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