Tutorial 3 - Monday, September 30, 2019-1.pdf - Tutorial 3...

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Tutorial 3 - Monday, September 30, 2019Question 1:Adam plays Nickelback tapes in his backyard that drives his neighbour Blair crazy. Themarginal utility to Adam is $500.00. The disutility to Blair is $600.00.(a)From the point of view of welfare economics, is it efficient for Adam to playNickelback?(b)Assuming transaction costs are zero, how might the Theorem of Coase resolve this?(c)A bylaw is passed prohibiting noise that disturbs neighbours. What will Adam andBlair do?(d)What is the maximum legal fee that can be charged to still permit the actions Blair orAdam take in (b) and (c)?(e)What are the law and economic issues involved if Blair recruits other neighbours whohave a disutility to Nickelback to help her?Question 2:A farmer switches from grain farming to raising pigs. The farmer’s pigfarm is moreprofitable, but the smell and water pollution that results is a serious cost for the neighbours.Twenty (20) neighbours sue this farmer for $1,000,000.00 and an injunction against the farm.(a)Is the claim efficient?(b)Should the court grant an injunction or just award the $1,000,000.00?Question 3:(Questions on Boomer v. Atlantic Cement)Read the case of Boomer v. Atlantic Cement in the Text at pp. 170172, then answer thefollowing questions:QUESTION 5.31: Is the externality inBoomerprivate or public?QUESTION 5.32: Are the transaction costs of bargaining among the parties low or high?QUESTION 5.33: Suppose the households had a right to enjoin the cement company to stoppolluting. What obstacles would the cement company face if it tried to purchase the right topollute from the households?QUESTION 5.34: Explain the remedy given by the court. Suppose that at some time in thefuture the cement company doubles its rate of output, thus increasing the noise, smoke, dust,and vibration inflicted on the neighbors. Do the homeowners have a remedy?

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Term
Fall
Professor
robert barber
Tags
Utility, Frisbee Research Inc

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