Consider the case of a hog farm whose runoff pollutes a nearby body of water that a fish farm uses. The pollution harms the fish, lowering profits for the fish farm by MD = 10E , where MD is marginal damage (in dollars of lost profits for the farm per ton of runoff) and E is the amount of polluted runoff from the farm (in tons per day). The hog farm's marginal cost of limiting polluted runoff (i.e., its marginal abatement cost curve) is MAC = 36 2E . Assume that all agreements between the two farms are legally enforceable and that transaction costs are insignificant.

Suppose there are no legal limits on runoff from the hog farm. If the two farms negotiate a Coasian bargain to reduce polluted runoff, what level of runoff (in tons/day) would they negotiate?