A familiar example of a negative externality is traffic congestion. In principle, it should be possible to internalize this externality by permitting drivers to negotiate about rights to drive during particular time periods. The most likely reason that this does NOT happen is that: Select one: a. Most individuals are unfamiliar with the Coase Theorem Ob. Lawyers would find a way to prohibit such negotiations unless they were actively involved, and this would make transaction costs prohibitive O C Any agreements arising from such negotiations could not be enforced, since the constitution guarantees all individuals freedom of access to all public roads d. The transactions costs associated with identifying and establishing communication among the interested parties would be prohibitive
A familiar example of a negative externality is traffic congestion. In principle, it should be possible to internalize this externality by permitting drivers to negotiate about rights to drive during particular time periods. The most likely reason that this does NOT happen is that: Select one: a. Most individuals are unfamiliar with the Coase Theorem Ob. Lawyers would find a way to prohibit such negotiations unless they were actively involved, and this would make transaction costs prohibitive O C Any agreements arising from such negotiations could not be enforced, since the constitution guarantees all individuals freedom of access to all public roads d. The transactions costs associated with identifying and establishing communication among the interested parties would be prohibitive
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter12: Environmental Protection And Negative Externalities
Section: Chapter Questions
Problem 1SCQ: Identify the following situations as an example of a negative or a positive externality: You are a...
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