Suppose that a brewer regularly dumps used yeast into a river and that a downstream water bottler must clean up the water before using it. Dumping the yeast into the river saves the brewer $500 in disposal costs each day. Cleaning up the water costs the bottler $600 each day. Now suppose that the law gave the brewer the right to dump yeast in the stream. Assuming that the conditions of the Coase theorem are met, the Coase theorem suggests that

The water bottler should pay the brewer company an amount of money that is higher than $500 but lower than $600.

Explanation:

Under the Coase Theorem, parties must negotiate a mutually beneficial agreement without considering the original distribution of property rights.

This means that the water bottler will try to lower its cleaning costs, and the brewer is not willing to pay any of the $500 cost to clean the water. But if the water bottler offers the brewer more than $500 for it to clean the water, they will take the money since it would generate them a profit. And as long as the money given to the brewer is less than $600, the water bottler will be saving money.This way both will win.

the answer is "b.the increased supply will create a surplus. "

the essential thought behind price controls is straightforward - utilize the power of law to modify the equilibrium of a market. for instance, the legislature may choose that the steel business needs to survive, and in this way pass a law to set a value floor on steel. this implies all steel sold must offer at or over the floor value, which must be set over the equilibrium cost for it to have any impact. the switch could likewise happen - the administration can choose that steel is excessively costly and set a value roof underneath its equilibrium value, with the goal that all steel must be sold at or beneath that ceiling.