Ted’s neighbor keeps live chickens. Some of the other neighbors do not like being awakened by the sound of a crowing rooster, but Ted kind of enjoys what he calls “the sound of the country” in the morning. Ted is

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The scenario presents Ted, who enjoys the sound of crowing chickens in the morning, while some neighbors are disturbed by the noise. When evaluating the options, we should map each statement to standard economic ideas about externalities and market failures.
Option a: 'avoiding the tragedy of the commons.' The tragedy of the commons describes overuse of a common resource due to individuals acting in their own self-interest, leading to depletion. Crowing chickens in a neighborhood is not a classic case of overuse of a shared resource by multiple individuals; therefore this option does not fit the situation.
Option b: 'eliminating deadweight loss.' Deadweight loss occurs when a market is inefficient, typically due to taxes, subsidies, or externalities that prevent mutually beneficial trades. The scenario does not present a market with a gap between total surplus and the achievable surplus caused by mispricing or externalities being internalized; thus this option is not an accurate characterization of Ted’s situation.
Option c: 'experiencing a positive externality.' A positive externality is a benefit to third parties not directly involved in the activity, or to society at large, that is not compensated for. In this case, Ted derives a personal benefit from the country sounds, which is a private benefit to him. However, several neighbors experience disutility from the crowing (a negative externality for them), so the net effect to others is not a clear positive externality. This makes the claim that Ted is experiencing a positive externality questionable, as the external effects on others are not strictly beneficial in aggregate. The statement conflates Ted’s private enjoyment with a broader external benefit, which does not align well with standard externality definitions given the mixed external effects on other neighbors.
Option d: 'applying the Coase theorem.' The Coase theorem concerns the resolution of externalities through bargaining when property rights are well-defined and transaction costs are low. The scenario provides no mention of negotiation, property-right allocation, or a potential bargaining outcome between Ted and the neighbors, so labeling the situation as an application of the Coase theorem is not justified.
In summary, each option either mischaracterizes the resource use issue, misidentifies the type of externality, or misapplies a theoretical framework to this concrete circumstance. The most fitting conceptual category would need to account for the fact that Ted’s enjoyment comes at a cost to some neighbors, indicating a mixed or negative external effect on others and a private benefit to Ted, rather than a straightforward positive externality. The option that claims a positive externality does not accurately reflect the overall social effect described, given the neighbors’ discomfort in addition to Ted’s enjoyment.

MCD2020 - T1 - 2025 Homework Quiz 5 - Market Failure and Government Intervention

Ted’s neighbor keeps live chickens. Some of the other neighbors do not like being awakened by the sound of a crowing rooster, but Ted kind of enjoys what he calls “the sound of the country” in the morning. Ted is

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