Mia Ha - Problem Set 5.docx

# B suppose there is one polluter and one victim and

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B. Suppose there is one polluter and one victim and the polluter has the right to pollute. Would a move from the level of pollution for which MB=0 to the one for which MB=MD satisfy the potential compensation criterion? If there is one polluter and one victim and the polluter has the right to pollute, then the move from the level of pollution MB = 0 (when the polluter ignore the damages that the victim suffer) to the optimal level of pollution in which MB = MD, then it would satisfy the potential compensation criterion. C. What difference, if any, would it make in considering the desirability of such a move if it resulted from Coasian bargaining rather than because of the imposition of a

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government regulation? In considering between the desirability of such a move (moving from the level of pollution for which MB=0 to the optimal level MB = MD) resulting from Coasian bargaining and resulting from the imposition, the difference would be that the Coasian bargaining will be more cost effective D. Some people argue that undesirable public facilities tend to be located far too often in poor neighborhoods. Explain why this may be correct, even if the location of the facilities is chosen solely on the objective basis of minimizing the dollar value of the damages they cause. Undesirable public facilities tend to be located in the poor neighborhood, simply because the money willing to pay of “poor” individuals is less that MWTP of “rich” individuals. Because of the difference in the dollar values, undesirable public facilities usually are located in poor neighborhoods and not in the richer neighborhood.

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