A factory produces smoke that causes damage of $80 to the laundry of a local resident. The smoke damage can be eliminated in one of two ways: the factory can install a chimney at cost $90 or the resident can purchase an electric dryer, and use this to dry his laundry, at cost $60. Questions: A) Suppose first that it is prohibitively expensive for the factory owner and the resident to negotiate. Fill in the payoffs in the matrix below if the factory has an unlimited right to pollute. What is the non-cooperative solution? Is this outcome efficient? Laundry No Dryer Dryer Factory Chimney No Chimney B) Again, suppose that it is prohibitively expensive for the factory owner and the resident to negotiate. Create a new payoff matrix that shows the payoffs if, when the factory pollutes, it must pay damages. What is the non-cooperative solution? Is this outcome efficient? C) Again, assume that it is prohibitively expensive for the factory owner and the resident to negotiate. Create a new payoff matrix that shows the payoffs if an injunction forces the factory to install a chimney. What is the non-cooperative solution? Is this outcome efficient? D) Suppose instead that the factory owner and resident can bargain costlessly. Assume when they bargain, that each party receives its threat value plus half the surplus. What will the outcomes be under the three legal rules? Your answer should include each party's payoffs. E) Which law (unlimited right to pollute, damages, or injunction) does Normative Coase Theorem favor? Explain. F) Which law (unlimited right to pollute, damages, or injunction) does Normative Hobbes Theorem favor? Explain.