In the case before her, Judge Thomas has heard claims by orange growers that to order a stop to orange growing in order to control a pest that thrives on oranges plants but does not harm them would result in a loss of profits of $3 million a year. The pest however causes $2 million of damages to trees owned by pulp manufacturers. The orange growers have not mentioned that they could control the pest at a cost of $1 million per year. High transactions costs have prevented the parties from reaching a private agreement. If she gives the property right to the
a. orange growers, they will then voluntarily control the pest.
b. orange growers, they will not control the pest.
c. pulp manufacturers, they will pay the orange growers to control the pest.
d. pulp manufacturers, the orange growers would offer a side payment of at least $2 million to be able to grow oranges.
b. orange growers, they will not control the pest.
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Substitution effects help explain the slope of the aggregate demand curve. One substitution effect refers to the
A) inverse relationship between the interest rate and the price level. B) direct relationship between the interest rate and the real value of wealth. C) effect on investment expenditures that result from a change in interest rates produced by a change in the price level. D) change in wealth that results from a change in the interest rate.
Natural monopolies are ________ and ________
A) rival; excludable B) nonrival; excludable C) rival; nonexcludable D) nonrival; nonexcludable
If the money supply increases 10-percent, velocity decreases 5-percent, and the price level increases 6-percent, then the change in real GDP is
a. 1. b. 4. c. -1. d. 5.
In order to internalize the externality due to pollution, the government should impose a tax based on
A) the economic damage associated with the pollution. B) the physical amount of pollution. C) the size of the firm causing the pollution. D) the value of the pollution-causing business activity.