PS1_Sample%20Essays - Essay Question Before the ruling,...

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Essay Question Before the ruling, farmers benefit because they have a regular water supply. They can grow more robust plants or perhaps even get two harvests out of their crops and sell them at a higher cost while the externalities of running the river dry is passed along to members of society who like river recreation. Their marginal private cost curve is artificially low because they are benefiting from dam water which they do not explicitly pay for. Salmon, salmon eaters, the ecosystem, and recreational users all lose because they cannot access the river water since their rights are not protected. After the ruling, all users of the free-flowing river benefit and the farmers lose. Recreational users, salmon, and wildlife have their property rights protected and therefore gain benefits from the use of the river. Farmers, on the other hand, lose because they do not have a legal right to use the water from the dam. Consumers of cheap agricultural products from these farmers could lose. These might be the same people who enjoy the free-flowing river. Likewise, farmers who benefited from the dam water might also be recreational users of the free-flowing river or salmon eaters. There could be a market resolution if farmers and free-flowing river users could get together and trade to a social optimum. Realistically though, this is unlikely since the three rules of the Coase theorem are not fulfilled. The costs to getting all of the
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PS1_Sample%20Essays - Essay Question Before the ruling,...

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