Saturday, November 12, 2011
Please help me in Econ Q?
Suppose we have a situation where an oil company produces some pollution during offshore oil extraction. This, in turn, negatively affects (by killing fish and reducing available fish stock) the fishermen that happen to use the fishery in the same area. Thus the fishermen face the following marginal external cost (MEC), MEC=10P/3, and the oil company faces the following marginal private benefits (MPB), MPB=500-5P. Now suppose that the fishermen own the property rights to the sea? Also ume that there IS negotiations between the two parties. How much does the oil company have to pay the fishermen for the right to pollute?"
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