Coase Theorem (20 pts) In a society, there are 2 firms (polluters A and B) and 1 individual (pollution victim). Firms can either choose low or high pollution. They incur abatement costs if they have to cut pollution from high to low. The individual incurs damages from pollution. Society faces a choice between the following options, with corresponding abatement costs and damages as shown in the table below. 3 All numbers in thousands of dollars Emissions Abatement Costs, A Abatement Costs, B Damages Both firms low 10 10 0 Firm A low, Firm B high 12 0 9 Firm A high, Firm B low 0 12 10 Both firms high 0 0 25. (6 pts) Suppose transaction costs are infinitely high between the individual and firm B, so it is impossible for the individual and firm B to ever be part of an agreement. But transaction costs are zero between the individual and firm A. The firms still own the right to pollute. Will firm A and individual A reach an agreement over the level of emissions? If so: (i) what level of emissions will they negotiate (ii) what is the maximum price the individual is willing to pay firm