Suppose the law says that Jones may not emit smoke from his factory unless he gets permission from Smith, who lives downwind. The relevant costs and benefits of filtering the smoke from Jones's production process are as shown in the following table. If Jones and Smith can negotiate with one another at no cost, will Jones emit smoke?

Transcribed Image Text:

Surplus for Jones Surplus for Smith Jones emits smoke $200 $400 Jones does not emit smoke $160 $420