21.2 The Coase Theorem is often applied in court cases where the parties seek to clarify who has the right to do what in the presence of externalities. Consider again (as in the text discussion) the case of the addition to my house that will then cast a shadow on your swimming pool. Suppose that my benefit from the addition is b and the cost you incur from my shadow is

c. Suppose throughout this exercise that transactions costs are zero.

A. In this part of the exercise, suppose that you and I both know what b and c are.