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28 Oct 2020

12. Bargaining costs are generally high in cases involving environmental externalities because

a. it is difficult to measure the costs of the externalities.

b. many individuals may be affected by externalities.

c. there are strong incentives to be a free rider.

d. all of the above.

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Raushan Raj
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28 Oct 2020

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Related questions

In an article in the agriculture magazine Choices, Oregon State University economist JunJie Wu made the following observation about the conversion of farmland to urban development: 
 
Land use provides many economic and social benefits but often comes at a substantial cost to the environment. Although most economic costs are figured into land-use decisions, most environmental externalities are not. These environmental 'externalities" cause a divergence between private and social costs for some land uses, leading to an inefficient land allocation. For example, developers may not bear all the environmental and infrastructural costs generated by their projects. Such market failures provide a justification for private conservation efforts and public land use planning and regulation. 
 
Source: JunJie Wu, "Land Use Changes: Economic, Social, and Environmental Impacts," Choices, Vol. 23, No. 4, Fourth Quarter 2008, pp. 6-10. 
 
By market failure, the author means:
 
(i) benefiting from a good without paying for it. 
(ii) a situation that occurs when one person's consumption of a unit of a good means no one else can consume it. 
(iii) a situation in which the market fails to produce an efficient level of output. 
(iv) a situation in which a benefit is present that affects someone who is not directly involved in the consumption of a good or service. 
(v) the tendency for a common resource to be underused.

Identifying and Providing Types of Goods

You will explain why some goods should be provided by the government and others should be provided by businesses. Given a list, correctly identify types of goods based on excludability and rivalness. Support

your answer.

TTask 1:

Consider the following list of goods. For each good, explain the following points.

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associated with this good?

Explain whether the private market should provide this good or the government should provide this good. Explain in terms of whether the characteristics of the good would make it difficult to be provided

by the private market or the government.

Answer for each event below.

A.

A cup of coffee at a coffee shop

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associa

ted with this good?

Explain whether the private market should provide this good or the government should provide this good. Explain in terms of whether the characteristics of the good would make it difficult to be

provided by the private market or the

government.

B.

City fire protection

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associated with this good?

Explain whether the private mark

et should provide this good or the government should provide

this good. Explain in terms of whether the characteristics of the good would make it difficult to be

provided by the private market or the government.

C.

Polar bears in the Arctic

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associated with this good?

Explain whether the private market should provide this good or the government shoul

d provide

this good. Explain in terms of whether the characteristics of the good would make it difficult to be

provided by the private market or the government.

D.

Clean air

Is the good rival?

Is the good excludable?

Identify the type of good (Private Good, Public Good, Common Resource, or Quasi Public Good)

Are there any externalities associated with this good?

Explain whether the private market should provide this good or the government should provide this good. Explain in terms of whether the characteristics of the good would make it difficult to be provided by the private market or the government.

1. Adam Smith's invisible hands refers to:

A. The subtle and often hidden methods that businesses use to profit at consumers' expense.

B. The ability of free markets to reach desirable outcomes, despite the self-interest of market participants.

C. The ability of government regulation to benefit consumers, even if the consumers are unaware of the regulations.

D. The way in which producers or consumers in unregulated markets impose costs on innocent bystanders.

 

2. Governments may intervene in a market economy in order to:

A. Protect property rights.

B. Correct a market failure due to externalities.

C. Schieve a more equal distribution of income.

D. All of the above.

 

3. If a nation has high and persistent inflation, the most likely explanation is:

A. The central bank creating excessive amounts of money.

B. Unions bargaining for excessively high wages.

C. The government imposing excessive levels of taxation.

D. Firms using their monopoly power to enforce excessive price hikes.

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