Suppose: - there is no legal penalty for polluting - there are no transactions costs, and - it is impossible for the neighbors to move. 7. What quantity does the rm produce? Give a concrete description of a deal that might be stuck between the rm and the neighbors (including the exact amount of money that changes hands). What is the social gain (your answer to this should be a number). Suppose: - the rm is required to reimburse the neighbors for pollution damage - there are no transactions costs, and - it is impossible for the neighbors to move. 3. What quantity does the rm produce and why? Suppose: - transactions costs are so high that negotiation is impossible - it would cost the neighbors $6 to move. - there is no legal penalty for pollution