ECON 471 Lecture Notes - Coase Theorem, Confectionery
Document Summary
Practice questions: b&l corp recently proposed a plan to commercially develop a wooded area located just outside of. Suppose that the size of the development is given by x and that the marginal private bene t of the development to b&l corp is given by mpb = 6000 x. Also, assume that the b&l corp"s marginal private cost of development is given by mpc = 2x. Assume that b&l corp cares only about pro ts. Environmentalists oppose the project because the area, which would be damaged by the development, is home to several rare species of ferret. What would happen? (c) now suppose that property rights to the wooded area are given to b&l corp rather than the environmentalists. Explain: a bee-keeper and a farmer with an apple orchard are neighbours. This is convenient for the orchard owner since the bees pollinate the apple trees: one beehive pollinates one acre of orchard.
