ECON 471 Study Guide - Midterm Guide: Community Property, Community Forestry, Externality
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If you answer q. 5, you may get up to 2 bonus marks. ___: ___, ___, ___, ____ (2 bonus marks) Answer the following questions as shortly as possible (without missing important points). The harm and net benefits for three different levels of drinking are as given below: How can coasian bargaining achieve this efficient solution (assuming bilateral bargaining is possible without any transaction costs). (5 points) Moderate drinking is the efficient solution as that level of drinking gives the highest net benefits to the society as a whole including the drivers (180. Note that ed gives net benefits of 210 - 150 = 60 < 80. When drivers switch to md from ed, they lose 210 - 180 = $ 30 but society gains by 150 -100 = $ 50 (reduction in harm). Society pays any amount between 30 and 50 to the driver to switch from.
