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Business, 27.02.2020 00:14 lucindabarba2017

Jolie grows asparagus for a living. Her asparagus beds, fertilized with manure, are extraordinarily productive. When Jolie tends five beds, her profits are $3,000. When Jolie expands her operation to six beds, she earns $3,600. Next door, Maddox runs a tea shop. When Jolie tends five beds of asparagus, Maddox's customers can't detect the smell of manure from Jolie's beds, and Maddox earns $1,200. When Jolie tends six beds, the smell of manure is noticeable, and Maddox's profits fall to $800. Suppose the law states that anyone using manure for fertilizer may not use so much that it bothers his or her neighbors. What is the size of the economic pie when Jolie tends five beds? What is the size of the economic pie when Jolie tends six beds? The benevolent social planner would like to see Jolie keep beds. Assume bargaining between Jolie and Maddox is easy, and Jolie wants to keep six beds. In order to get Maddox to agree to a bargain, Jolie needs to offer him any amount between for his losses. The benevolent social planner endorse this bargain.

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