A.According to the Coase theorem, why would a Hobart zinc refinery that is legally allowed to emit pollution agree to reduce its pollution emissions even though it is not in its own private interests? How might transactions costs prevent this?

B.Suppose instead the government introduces a subsidy of $0.30 per litre on wholesale milk. How much will the subsidy cost the government? Calculate the size of the consumer and producer surplus in $ per year and explain who is better and worse off as a result of the subsidy.