Answer the following questions for the given example: Using water pumps in homes (a) Does an externality exist? If so, is it positive/negative (or both) (b) Use Coase’s framework to identify the cause of the externality (c) If an externality exists, determine whether the Coase theorem applies (i.e. is it possible/feasible to assign property rights and solve the problem?). Provide reasoning. (d) If an externality exists and the Coase theorem does not apply, discuss a government/institutional solution that can mitigate the problem of externality. Provide reasoning.
Answer the following questions for the given example: Using water pumps in homes (a) Does an externality exist? If so, is it positive/negative (or both) (b) Use Coase’s framework to identify the cause of the externality (c) If an externality exists, determine whether the Coase theorem applies (i.e. is it possible/feasible to assign property rights and solve the problem?). Provide reasoning. (d) If an externality exists and the Coase theorem does not apply, discuss a government/institutional solution that can mitigate the problem of externality. Provide reasoning.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Answer the following questions for the given example: Using water pumps in homes
(a) Does an externality exist? If so, is it positive/negative (or both)
(b) Use Coase’s framework to identify the cause of the externality
(c) If an externality exists, determine whether the Coase theorem applies (i.e. is it possible/feasible to assign property rights and solve the problem?). Provide reasoning.
(d) If an externality exists and the Coase theorem does not apply, discuss a government/institutional solution that can mitigate the problem of externality. Provide reasoning.
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