1. (10 points) The figure below shows the marginal benefit to a firm of polluting in the local river while producing its output, and the marginal cost to the surrounding neighbours. The marginal cost of production is zero for the firm. MC to society MB to firm 500 1000 Pollution a) If property rights are not defined, how much pollution will occur? b) If the firm owns the river and there are thousands of surrounding neighbors, how much pollution is likely to occur? c) If there is just one neighbor who owns the river, how much pollution is likely to occur? d) According to Coase's Theorem, which of the following scenarios is most likely to lead to the socially optimal level of pollution? Explain why. The firm owns the river and there are a thousand surrounding neighbors. ii. The firm owns the river and there is just one nearby neighbor. The river is jointly owned by one thousand surrounding neighbors. iv . The firm owns the river, and therefore produces the social optimum no matter what