Refer to Pollutants. Suppose transactions costs are zero. Also suppose the chemical plant is not liable for the farm's crop damages and can continue to pollute the stream. What will be the result of private bargaining between the farm and the chemical plant?
A chemical plant's production adds pollutants to a stream which irrigates a farm's crops. The pollutants damage the farm's crops, increasing the firm's costs by $800 per month. The crop damage may be eliminated in two ways: the chemical plant can install a new filtering system costing $300 per month, or the farm can install a new irrigation system costing $600 per month.
a. The chemical plant will pay the farm $800 per month in crop damages.
b. The farm will bear the $800 per month cost of crop damages.
c. The chemical plant will install the new filtering system.
d. The farm will install the new irrigation system.
c. The chemical plant will install the new filtering system.
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A) nonrival; nonexcludable; cannot B) nonrival; excludable; can C) nonrival; nonexcludable; can D) rival; nonexcludable; cannot
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A) the marginal propensity to save B) the marginal propensity to consume C) the marginal rate of substitution D) the average propensity to consume
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a. a reduction in the general level of prices b. an abnormally high rate of unemployment c. increases in real interest rates and real resource prices d. a reduction in imports
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A) the percentage change in quantity demanded exactly offsets the percentage change in price. B) buyers are buying the same quantity. C) total revenue never changes with price changes. D) the change in profit is offset by the change in production cost.