If the chemical factory has the property right to use the river what bargaining will result in the socially efficient equilibrium? What are the net gains experienced by each party?

Question

Quizplus · Accepted Answer

The Answer is Since the chemical factory has the right to pollute,the fishery will need to pay the factory to get it to reduce its emissions.The socially efficient level of emissions is equal to 80 units of emissions.At this level of emissions,the MDC = MAC = $800.The fishery will need to pay the chemical factory $800 per unit of emissions it abates to get it to emit 80 tonnes.This "bribe" is equal to $128,000.The net gain to the fishery is equal to the reduction in total damage costs moving from unregulated emissions of 240 units to 80 units minus the bribe it pays to the chemical factory which equals $288,000 - 32,000 - $128,000 = $128,000.The net gain to the chemical factory is equal to the bribe it receives from the fishery less its total abatement costs which equals 128,000 - 64,000 = $64,000.

If the Chemical Factory Has the Property Right to Use