SQ3_ExternalitiesAK(1)

How will the new owner use the right and what will be

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Unformatted text preview: 109 Assume the villagers make their investment decisions one after the other, and their decisions are public. a. If each villager decides individually how to invest, how many llamas will be sent out into the commons, and what will be the resulting net village income? b. What is the socially optimal number of llamas for this village? Why is it different from the actual number? What would net village income be if the socially optimal number of llamas were sent out into the commons? Why might it be difficult for the villagers to agree to send the socially optimal number of llamas into the commons? c. Suppose the village decides to auction the right to graze llamas on the commons to the highest bidder. Whoever purchases the right to graze llamas on the commons can resell this right to anothe...
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This note was uploaded on 02/13/2014 for the course ECON 2 taught by Professor Kim during the Winter '08 term at UCSD.

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