Answer:
1.- If Joe owns the rights to the river will enforce his property rights and not allow Plastics to pollute and clean the pollution. Plastic is breaking his rights on the river
In this scenario Joe has benefit for 20,000
and Plastic losses for 12,000
2.- If Plastic own the rights to the river Joe will pay Plastics $15,000 to not pollute. This will make Plastic earn money for cleaning the river and Joe gain 5,000 incremental benefit
Explanation:
(A) Joe has legal claims, so It will used before any economic options
(B) Joe doesn't have legal claims, but It notices that a good offer make both parties win.
Plastic will receive 15,000 dollars to clean the river, which has cost of 12,000 realizing a net gain of 3,000
While Joe estimated a marginal benefit of 5,000 after paying to Plastic to clean the river, (20,000 benefit - 15,000 cost)
<u>Notice: </u>the option for escenario (B) is also stands on (A) but because Joe has the legal rights on the river, it will try to make Plastic paid the pollution on the river and take the benefit completely for his own.
