Suppose that a fish-food manufacturing company is located up the river from a fishing firm and often releases some of the food into the river.This means:
A)the fish food manufacturing company is imposing a negative externality on the fishing firm
B)the fish food manufacturing company is imposing a positive externality on the fishing firm
C)under the Coase theorem the two companies should be able to negotiate away the externality
D)unless the government imposes a tax on river pollution, the fishing firm will continue to be negatively impacted by the fish-food manufacturing company

Question

Quizplus · Accepted Answer

The fish-food manufacturing company is providing a positive externality to the fishing firm by releasing food into the river, which likely benefits the fish and thus the fishing firm.

Suppose That a Fish-Food Manufacturing Company Is Located Up the River