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4.Consider the case of water pollution in which the activities of a firm harm its neighbours: a) Explain carefully the nature of the market failure
4.Consider the case of water pollution in which the activities of a firm harm its neighbours: a) Explain carefully the nature of the market failure that occurs. [6 marks] b) What is the Coase theorem? [4 marks] c) How might the Coase theorem help to solve this externality problem? [7 marks] d) What practical difficulties may reduce the applicability of the Coase theorem in the real world? [8 marks]
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