The Coase theorem states that if property rights exist, the number of parties is small, and transactions costs are low, there will be no externalities regardless of who owns the property rights. Select one: True False
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The Coase theorem states that if property rights exist, the number of parties is small, and transactions costs are low, there will be no externalities regardless of who owns the property rights.
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- Three neighboring towns – Marshland, Dampland, and Wetland – all border the same lake. The lake frequently floods causing damage to property in all three towns. Each town would benefit from flood mitigation, but the level of benefits differs. With Z representing the level of mitigation: for Marshland, MB = 3 – Z for Dampland, MB = 4 – 2Z for Wetland, MB = 11- Z The marginal cost of flood mitigation is MC = 2 + 12Z Questions: ***Please Note*** Previous Expert Calculated: Z = 16/3 as the Solution to (a) Math Solver Calculates: Z = 1 ***Please Resolve*** (a) What is the socially optimal level of Z? (b) What would each individual town be willing to pay for this level of flood mitigation? (c) The representative from Wetland proposes that each town pay an equal share for the optimal level of flood mitigation. Would…Consider the case of: Buying a car with added safety features that prevent the drivers and passengers’ deaths in the event of an accident (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 feasible to assign property rights and solve the problem?) (d) If an externality exists and the Coase theorem does not apply, discuss a government/institutional solution that can mitigate the problem of externalityConsider the case of: Buying a car with added safety features that prevent the drivers and passengers’ deaths in the event of an accident (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 feasible to assign property rights and solve the problem?)
- Consider a binary choice to allow or not the emission of pollutants. The cost to consumers of allowing the pollution is C = 2,000, but this cost is only observable to the consumers. The benefit for the polluter of allowing the externality is B = 2,300, and only the polluter knows this benefit. Clearly, optimality requires this externality is allowed, since B > C. However, the final decision must be based on what each party chooses to reveal. a. Construct a tax-subsidy revelation scheme such that it is a dominant strategy for each party to report truthfully their private information. b. Show that this revelation scheme induces the optimal production of the externality. c. Show that this revelation scheme is unbalanced in the sense that the given equilibrium reports the tax to be paid by the polluter is less than the subsidy paid to the pollutee.assume that there are 1000 residents of a town, each of whose marginal benefit (willingness to pay) for having x miles of roads is P = 100 - 5x. Roads are built competitively at a marginal cost of MC = 2000 per mile. Roads are a public good. What is the efficient level of roadway construction? It is closest to? If residents decide on road building independently, how many miles of roadway will be built? It is closest to:Price and Cost B. (A E. Q2 Q1 Quantity Analyzing the prior graph which type of externality is this? Which line is the private and which is the public? What quantity does the private market produce, which quantity does the public want? Now give three (3) examples of this type of externality.
- Question- In Parkland County there are three residents: ANDREW, BETH, CATHY. They exercise different amounts and have different marginal benefits for any given size of public park. The marginal benefits for each person are: MBA (A) =6-A/4; MBB (A) =14-A; MBC (A)=15-3A, where subscripts denote each person. The marginal cost of A acres of park is 18. Suppose the county government informs the voters that for each unit of A, each person will pay a tax of $6. What would be each person's preferred size of A? What would be the size of A that would result from voting? Suppose that the government of Parkland decides that it wants to provide the efficient size of park. Further suppose that the government decides it is now willing to charge different people a different tax to meet this goal. What would be the size of A ? How much will the government charge each person?The proposition that problems of externalities will be resolved efficiently through private exchange is known as Property rights Pollution abatement Coase theorem Tort lawBack to Assignment Attempts Keep the Highest / 2 9. Private solutions to correct for externalities Consider the following scenario: Suppose that a chicken farm uses a nearby stream to dispose of the wastes released by its chickens. These wastes flow downstream into a lake that has become thick with algae and polluted by the minerals in the waste matter. The local office of a nonprofit environmental organization collects enough donations to fund a campaign to stop the farm's pollution. Which of the following types of private solutions to the externality of pollution has occurred in this case? O Charities O Integration of different types of businesses through merger or acquisition O Moral codes and social sanctions O Contracts It's important to note that sometimes private solutions to externalities do not work. For example, this occurs when an excessive amount of time or money must be spent for parties to reach an agreement. This describes the problem of Grade It Now Save & Continue…
- Consider two groups of citizens, each group can either choose to drive x = d or to take public transport x = p. The first group, group 1, enjoys driving and has the following benefit from using their car within the area: B1(x1 = d) = 18. The second group, group 2, does not enjoy driving and has a benefit of B2(x2 = d) = 0 from driving their car. If they don’t drive, citizens can use public transport to get around. The benefit of doing so is the same for both groups: B1(x1 = p) = B2(x2 = p) = 10. Both groups drive cars that do not meet the requirements and therefore create excessive pollution. Cost is imposed on both groups and is equal to Ci(x1 = d,x2 =d)=10 if both groups drive, Ci(x1 =p,x2 =d)=Ci(x1 =d,x2 =p)=5 if only one group drives and Ci(x1 = p, x2 = p) = 0 if neither group drives, where i represents either group 1 or group 2. The utility of each group from choosing action xi is equal to the benefits minus the costs: Ui(xi,xj)=Bi(xi)−Ci(xi,xj), where i∈{1,2}. 1. Compute the…The EPA determined the presence of a public health and ecological damage externality cost in dollars of MEC=0.020 associated with Qunits of nitrogen oxides output of a chemical process per month.There was no evidence of external benefit. The marginal social benefit was estimated as MSB=50-0.4Q and the marginal social cost as MSC=2+ 0.40 What is the competitive solution? What is the socially conscious solution? If you start with the competitive solution (Q=?) and you want to assess a Pigouvian tax equal to the externality, how much would that tax be?In the context of energy supply, describe how the existence of a negative production externality may lead to a socially inefficient outcome. Critically analyse a Pigovian solution aimed at internalising this type of externality. Answer within 500 words and use economic figures wherever applicable (there is no minimum requirement on the number of words as long as all the questions are clearly answered).