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Firm Alpha can leave its windows uncovered or pay to install shutters on its windows. Whether...

Firm Alpha can leave its windows uncovered or pay to install shutters on its windows. Whether the shutters are installed has an effect on Firm Beta’s profit, as illustrated in the table 1. 2. 3. 4. 5. below. Does the shutter installation create a positive or a negative externality? Explain. Is it efficient for the shutters to be installed? Explain. Suppose that Firm Alpha has the property rights. What will happen if the firms negotiate? Suppose that Firm Beta has the property rights. What will happen if the firms nego- tiate? Relate your answers above to the Coase Theorem.

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Rahul Sunny answered 6 months ago
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