Question

Suppose two neighbors share a park. One neighbor, Al, leaves trash in the park. This bothers the other neighbor, Bill. a. According to Coase's Theorem what is the optimal level of trash in the park? b. According to Coase's Theorem is there a way to alleviate the externality? c. According to Coase's Theorem is there a way to achieve the optimal level of trash in the park?

Answer 1

Answer:

1 optimal level is the level of trash where AL willingness to compensate Bill is equal to damage cost to bill by trash

2 it can be alleviated

3 yes there is a way by granting property rights to either of the two parties