6. The Pacific Pulp Company plans to clear cut 100 acres of land to produce paper pulp...
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Question:
6. The Pacific Pulp Company plans to clear cut 100 acres of land to produce paper pulp which would
earn the firm $50,000 in profits. One hundred nearby homeowners realize that this would reduce the
value of each of their properties by $1,000.
(i) What would the efficient outcome be? Explain.
(ii) Suppose the Pacific Pulp Company is not liable for the reduced home values (the company has the
property right to the land). Is the efficient outcome likely? Explain.
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