-The Figure Above Shows the Costs Associated with Producing Paper

Multiple Choice

-The figure above shows the costs associated with producing paper. When paper is produced, there is some pollution runoff into a lake. According to the Coase Theorem, if the transactions costs are low and there are only a few people involved, the output will equal ________ tons of paper if ________ own the lake.

A) 3; only the lakeside residents
B) 3; either the firms or lakeside residents
C) 4; the firms
D) 4; either the firms or lakeside residents