Asked by Suzanna Mondragon on May 19, 2024
Verified
Refer to Scenario 18.1. Which of the following is TRUE?
A) The factory will never agree to B, because that would leave them with much less profit than the fishermen.
B) C will never occur because that would leave the fishermen with much less profit than the factory.
C) If the factory refused to install a filter, the fishermen would refuse to install a treatment plant.
D) The factory must install a filter, because they contaminate the water.
E) The profits above indicate profit before any agreement is made, and profit varies enough to make a mutually acceptable agreement possible.
Treatment Plant
A facility used for filtering and treating water or wastewater to meet legal and ecological standards before it's released or reused.
Filter
A process or device for removing impurities or unwanted elements from a substance.
Negotiate Costlessly
The theoretical process of reaching an agreement without incurring any transaction costs or bargaining expenses.
- Understand the principles of the Coase theorem and how it applies to negotiating pollution costs and benefits.
Verified Answer
RC
Rebekah CarverMay 24, 2024
Final Answer :
E
Explanation :
The profits before any agreement show a range of outcomes where negotiation can lead to a mutually beneficial agreement, such as sharing the costs of the filter or treatment plant to reach a more equitable profit distribution.
Learning Objectives
- Understand the principles of the Coase theorem and how it applies to negotiating pollution costs and benefits.