Effectiveness of Legal Liability in Different Externality Scenarios
Critically evaluate the effectiveness of a legal system that requires a party to compensate for the harm it causes as a tool for addressing negative side effects in the following two distinct scenarios.
Scenario A: A single, large chemical plant releases a pollutant into a small lake, killing the fish and harming the business of a local fishing tour company.
Scenario B: The combined exhaust fumes from thousands of individual cars in a large city contribute to poor air quality, leading to a general increase in respiratory illnesses among the city's population.
In your evaluation, compare the likely success of the legal mechanism in each scenario, explaining the key factors that would make it more or less effective.
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