Questions
Single choice
According to the Coase theorem, negative externalities can be internalized if
Options
A.a. property rights are assigned to the party who is being damaged.
B.b. property rights are assigned to either party.
C.c. property rights are assigned to the party who is doing the damage.
D.d. the government takes action to solve the problem.
View Explanation
Verified Answer
Please login to view
Step-by-Step Analysis
When evaluating the Coase theorem and its claim about internalizing negative externalities, a few key ideas come into play.
Option a: 'property rights are assigned to the party who is being damaged.' While this specifies who suffers the harm, the theorem does not require a particular assignment of rights to be efficient; it asserts that any clear definition of rights ena......Login to view full explanationLog in for full answers
We've collected over 50,000 authentic exam questions and detailed explanations from around the globe. Log in now and get instant access to the answers!
Similar Questions
Question65 Which of the following is required for Coase Theorem to hold? There are no wealth effects All of the other options There are few affected parties Property rights are clearly defined ResetMaximum marks: 1 Flag question undefined
A farm can produce up to 10 tons of corn p.a. which the farmer sells for $1000 per ton. The cost of running the farm is $8000 p.a. A rancher intends to set up a cattle operation on the land she owns next door. The cattle operation will earn $4000, but the cows will wander over to the farm, trample the corn and reduce output by one ton. It costs $1500 p.a. to build a fence that keep the cattle on the ranch. Assume the rancher and the farmer are able to negotiate, as required by the Coase theorem.
Question at position 6 [table] Number of Paintings | Profits to Painter | Total Cost to Gardener 0 | $0 | $0 1 | $18 | $8 2 | $32 | $16 3 | $42 | $24 4 | $48 | $32 5 | $50 | $40 [/table] A painter likes to paint pictures of flowers to sell. The table above shows the profits earned by a painter based on the number of paintings that he creates. However, when painting the painter drips paint which damages the flowers and causes a cost to the gardener who would sell those flowers. Suppose the gardener sues the painter in a common law court. The judge finds in favor of the painter. If the gardener wants fewer paintings painted she will have to pay the painter to reduce the number. The gardener is willing to pay up to $8 while the painter needs to receive at least $2 to be convinced not to paint the 5th painting. The painter and the gardener will consider more deals of this type. What is the number of paintings that will be painted? (Hint: compare the change in the gardeners' costs to the change in the painter's profit. If the painting adds more to the gardener's costs than it does to the painter's profits, they will be able to make a deal to eliminate that painting.) Answer[table] Number of Paintings | Profits to Painter | Total Cost to Gardener 0 | $0 | $0 1 | $18 | $8 2 | $32 | $16 3 | $42 | $24 4 | $48 | $32 5 | $50 | $40 [/table] A painter likes to paint pictures of flowers to sell. The table above shows the profits earned by a painter based on the number of paintings that he creates. However, when painting the painter drips paint which damages the flowers and causes a cost to the gardener who would sell those flowers. Suppose the gardener sues the painter in a common law court. The judge finds in favor of the painter. If the gardener wants fewer paintings painted she will have to pay the painter to reduce the number. The gardener is willing to pay up to $8 while the painter needs to receive at least $2 to be convinced not to paint the 5th painting. The painter and the gardener will consider more deals of this type. What is the number of paintings that will be painted? (Hint: compare the change in the gardeners' costs to the change in the painter's profit. If the painting adds more to the gardener's costs than it does to the painter's profits, they will be able to make a deal to eliminate that painting.) [input]
According to the Coase Theorem, efficient solutions to negative externalities can be achieved through bargaining. Which of the following is NOT a reason why bargaining may fail in practice?
More Practical Tools for Students Powered by AI Study Helper
Making Your Study Simpler
Join us and instantly unlock extensive past papers & exclusive solutions to get a head start on your studies!