A single competitive firm pollutes the air. There are no transactions costs between this firm and the neighbors who suffer from the pollution. In terms of the following diagram, what is the maximum amount that the neighbors would offer the firm in exchange for cutting its production back from QE to QO? What is the minimum amount the firm would accept? How do you know that the deal is certain to gothrough?

Transcribed Image Text:

MCjocial MCprint 2o QE 0