SQ3_ExternalitiesAK(1)

E camp canoe would simply demand that the lakeside

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Unformatted text preview: ed when no garbage is dumped in the lake (1600>1500). b. The Lakeside Café will dump garbage into the lake since 1100>1000. c. The Coase Theorem tells us that the social optimum will be achieved, so no garbage will be dumped in the lake. d. Camp Canoe could pay $150 dollars to the Lakeside Café every day to stop dumping garbage into the lake. The Lakeside Café would then have $1150 per day and Camp Canoe would have $450 per day (so they would both be $50 better off than when the garbage was being dumped in the lake). e. Camp Canoe would simply demand that the Lakeside Café stop dumping garbage since they have the legal right to do so. f. The economist won’t care. In either case, the efficient outcome is achieved. g. Camp Canoe does care. The...
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