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Jim Rice Incorporated operates a large scale rice farm that borders on a major recreation lake owned by Great Fishing Resorts. Rice is grown in

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Jim Rice Incorporated operates a large scale rice farm that borders on a major recreation lake owned by Great Fishing Resorts. Rice is grown in that area with large amounts of nitrogen-based fertilizer, and there are no possible scientific changes on the horizon that can change this fact. The run-off from the fields causes excess nitrogen to flow into the lake with negative effects on the fish population there. As rice production increases, the marginal damage done to Great Fishing's property increases. Society in this area is composed of Jim Rice Incorporated and Great Fishing Resorts. The information below shows the costs and benefits to Jim Rice Inc. of producing rice and the external damage done to Great Fishing's Lake. There are no positive externalities from rice production. a. b. Determine the socially optimal amount of rice. Explain your answer {32 points}. Suppose that there are extremely high negotiations costs between Jim Rice Incorporated and Great Fishing Resorts and that Jim Rice has the right to pollute. Jim focuses on maximizing his own net benefit. How many tons of rice do you anticipate will be produced? Explain. [32 points} . If there were zero negotiations costs and Great Fishing had the right to stop all pollutions, is it possible that Jim Rice Inc. could end up producing the socially optimal amount of rice? If not, explain why not? If so, explain the process that would lead to the socially optimal amount. Be specific using the information in the tables. {32 points] . Say there were high negotiations costs and Jim's Rice Inc. had the right to pollute. If you were trying to choose a per-unit tax that would get Jim's Rice Inc. to choose the socially optimal production of rice, what would it be and why? Remember that a per-unit tax means that the tax is the same amount at every level of output [24 points}

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