1.In the US there are millions of Youngs and millions of Olds all living together. There is currently no law preventing the Youngs from going to party (or other crowd based activities) i.e. they have a right to party.

a.Coase's theorem states conditions under which bargaining over externality leads to efficient outcomes. Name one of these conditions that fail?

b.Given the values described for Youngs and Olds in question 10 and your answer to 11a, should we expect Youngs to keep partying or not?

c.Read section 9.2, what might prevent Youngs going out to party if the government doesn't pass laws preventing it?

Social ___________________

2.This question is about Youngs, Olds, and global warming. Olds like driving SUVs which causes global warming. Old people are not really hurt by global warming, but young people are.

a.Suppose there is just one Old and one Young. Moreover, the Old has the legal right to drive the SUV. Would the Old drive the SUV too much or too little with respect to maximizing social surplus?

b.If the Young and Old were to bargain over driving the SUV:

i.Would the Old drive the SUV more or less than without the bargaining?

ii.Who would give money to who?