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Unformatted text preview: it identical to the Social MC curve. The socially optimal number of boom boxes would be rented, resulting in an overall increase in efficiency in this market. 6. (5pts) Suppose the law says that Jones may not emit smoke from his factory unless he gets permission from Smith, who lives downwind. If the relevant costs and benefits of filtering the smoke from Joness production process are as shown in the following table, and if Jones and Smith can negotiate with one another at no cost, will Jones emit smoke? Jones emits smoke Jones does not emit smoke Surplus for Jones $200 $160 Surplus for Smith 400 450 Answer : The most efficient outcome is for Jones to not emit smoke, because the total daily surplus in that case will be $610, compared to only $600 when Jones emits smoke. The most Jones would be willing to pay Smith is $40 to be able to emit smoke, but Smith would need to be paid at least $50 to agree....
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This note was uploaded on 02/20/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.
- Spring '08