Green Acres Fertilizer Company is near Barney's Dry Cleaning Service. Green Acres' production process emits toxic odors that are absorbed by the clothing Barney cleans. The result is that Barney has lost many customers over time. Barney estimates that the odors cost his business $20,000 per year. The bad smell also bothers everyone in town! Green Acres can eliminate its odors by altering its production process at a cost of $30,000 per year. Answer the following questions:

1. If Green Acres has the right under the law to emit the toxic odors, what will be the likely result and why?
2. Are toxic odors a negative or positive externality
3. Results:

• If there is no mitigation or law stopping Green Acres from polluting, will the price Green Acres charge be too high or too low for society's optimalization?
• If there is no mitigation or law stopping Green Acres from polluting, will the quantity of product Green Acres produces be too high or too low for society's optimalization?

d. What if instead Barney realized his business was now losing $40,000 a year, but it was still legal for Green Acres to pollute. What might he offer to do within the normal marketplace? Please describe what he might offer and why that might be acceptable to Green Acres.

e. What are some ways that the government could step in to mitigate the externality of toxic orders. Come up with at least two.