Microeconomics 6th Edition by Robert Hall, Shirley Kuiper, Marc Lieberman

Exercise 1

Review the example in the section on "The Coase Theorem," where the resident's harm was greater than the truck driver's benefit from using the shortcut. Suppose the situation were reversed. Specifically,suppose that the truck driver gains $12 by using the shortcut,and the harm to the resident is $7.
a. Is it efficient for the truck driver to stay on the highway and not use the shortcut? Briefly,why or why not?
b. If the truck driver has the legal right to use the shortcut,would you expect the resident to offer him a sufficient side payment to get him to stay on the highway? Why or why not?
c. If the resident has the legal right to block the truck driver from using the shortcut,would you expect the truck driver to stay on the highway? Why or why not?