Suppose that a flower nursery benefits from having a butterfly farm located only a few miles away, because the presence of the insects greatly improves flower pollination. Lawyers for the two companies meet to draft a legal document specifying the number of butterflies the farm promises to maintain in exchange for payments by the nursery. The need for highly paid lawyers to work out a legal agreement between the flower nursery and the butterfly farm contradicts an important requirement of —namely, that the parties experiencing an externality must be able to .
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Suppose that a flower nursery benefits from having a butterfly farm located only a few miles away, b...
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