Question 1

The common pool problem refers to _____.

Accepted Answer

The common pool problem refers to the fact that nobody has an incentive to consider the costs their actions impose on others, leading to overuse or depletion of shared resources.

Question 2

The Coase Theorem states that _____.

Accepted Answer

The Coase Theorem posits that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights.

Question 3

Poorly defined property rights imply that _____.

Accepted Answer

Poorly defined property rights imply that people may be able to use resources without paying for them as there is no clear ownership or legal framework for resource use.

Question 4

The key to reaching a Pareto optimum through mutually beneficial exchange _____.

Accepted Answer

Establishing property rights for valuable resources allows for efficient allocation of resources and incentivizes people to enhance their resources, leading to improved productivity and reaching a Pareto optimum through mutually beneficial exchange. Removing barriers to international trade can also improve exchange, but alone may not necessarily lead to a Pareto optimum. Providing start-up capital and encouraging the use of online auction services can be helpful for entrepreneurs but is not directly related to reaching a Pareto optimum through exchange.

Question 5

The Coase theorem applies to cases where _____.

Accepted Answer

The Coase theorem applies to cases where transactions costs are zero, meaning that there are no costs associated with the negotiation and enforcement of property rights. In such cases, parties can reach an efficient outcome without the need for government intervention, as they can negotiate and bargain with each other to reach a mutually beneficial agreement.

Question 6

When property rights are poorly-defined,a setting with large numbers of people suggests _____

Accepted Answer

When property rights are poorly defined, transactions costs tend to be high because it becomes more difficult and costly to negotiate and enforce agreements.

Question 7

Coase made famous a court case between a doctor and a confectioner.Suppose that exact case happened again and transactions costs were absent.When would we be sure that resources were inefficiently allocated?

Accepted Answer

If zoning laws are changed to prevent the confectioner from manufacturing in the current location, it imposes an external restriction that could lead to inefficient allocation of resources, as it prevents the parties from reaching a mutually beneficial agreement.

Question 8

One reason why African elephants are endangered is _____.

Accepted Answer

Governments often prohibit private ownership of African elephants, which helps to protect them from being exploited.

Question 9

The Coase Theorem does not imply which of the following?

Accepted Answer

The Coase Theorem implies that the initial allocation of property rights does matter because it affects the distribution of wealth and bargaining power among the parties, even if it does not affect the efficiency of the resource allocation in the absence of transaction costs.

Question 10

Property rights often remain poorly defined because of _____.

Accepted Answer

Poorly defined property rights often result from the difficulty in enforcing ownership once it is defined, as enforcement can be costly and complex.

Question 11

Which of the following statements best summarizes why buffalo almost became extinct during the 1800s?

Accepted Answer

The answer of Which of the following statements best summarizes...

Question 12

A property right _____.

Accepted Answer

Property rights come with responsibilities such as maintaining the property, not causing harm to others or their property, and paying taxes. Property rights are not absolute and can be limited by laws and regulations. The right to free speech is a different type of right entirely. Burning trash in one's yard is generally not allowed due to environmental and health concerns.

Question 13

Which of the following is not a problem with poorly defined property rights?

Accepted Answer

Poorly defined property rights typically lead to overutilization or misuse of resources, rather than underutilization, because individuals may exploit resources without bearing the full cost of their actions.

Question 14

A property right _____.

Accepted Answer

Property rights do not mean absolute freedom, as the owner still has obligations and responsibilities related to the property, such as maintenance and upkeep. Additionally, property rights can be limited by laws and regulations. Answers A, B, and D are incorrect because property rights do not necessarily give the owner unlimited control over the property, apply to various types of property, and are not dependent on the owner's ability to physically protect it.

Question 15

The Coase Theorem implies that _____.

Accepted Answer

The Coase Theorem states that in the absence of transaction costs, resources will be efficiently allocated regardless of who has the property rights. This means that even if allocation is initially inefficient, bargaining between parties will result in an efficient allocation of resources. Therefore, option A is correct. Options B, C, and D are incorrect.

Question 16

The Coase Theorem implies that when there are no costs to trading,_____.

Accepted Answer

The Coase Theorem states that when there are no costs to trading, resources will move to their most valued uses, regardless of who initially holds the property rights. In other words, efficient outcomes will be reached through private bargaining and negotiation, regardless of the allocation of property rights.

Question 17

There are likely to be low transactions costs when _____.

Accepted Answer

The answer of There are likely to be low transactions...

Question 18

If transactions costs are high and the number of individuals involved is large,then the assignment of property rights _____.

Accepted Answer

When transactions costs are high and the number of individuals involved is large, the assignment of property rights becomes crucial for achieving economic efficiency as it can provide incentives for individuals to invest in the efficient use of resources, negotiate with one another, and overcome free rider problems. Therefore, the best choice is C, which states that property rights matter for economic efficiency. The other options, A, B, and D, do not necessarily apply in this scenario.

Question 19

In Coase's case of the doctor and the confectioner,who or what caused the negative situation?

Accepted Answer

Coase's case highlights the problem of externalities, where one person's actions affect another without their consent. In this case, the negative situation arises because of poorly defined property rights, as neither the doctor nor the confectioner have a clear right to the use of the space. If property rights were well-defined, the parties could potentially negotiate a solution that benefits both parties, such as the doctor paying the confectioner to move or soundproofing the confectioner's shop.

Question 20

In the context of the Coase theorem,the reciprocal nature of the problem is the fact that _____.

Accepted Answer

The reciprocal nature of the problem, as described by the Coase theorem, means that both parties are responsible for creating the problem or dispute. This concept emphasizes that the issue arises from the mutual situation of the parties involved, rather than being solely the fault of one side.

Quiz 3: Property Rights and Economic Efficiency

The common pool problem refers to _____.

The Coase Theorem states that _____.

Poorly defined property rights imply that _____.

The key to reaching a Pareto optimum through mutually beneficial exchange _____.

The Coase theorem applies to cases where _____.

When property rights are poorly-defined,a setting with large numbers of people suggests _____

Coase made famous a court case between a doctor and a confectioner.Suppose that exact case happened again and transactions costs were absent.When would we be sure that resources were inefficiently allocated?

One reason why African elephants are endangered is _____.

The Coase Theorem does not imply which of the following?

Property rights often remain poorly defined because of _____.

Which of the following statements best summarizes why buffalo almost became extinct during the 1800s?

A property right _____.

Which of the following is not a problem with poorly defined property rights?

A property right _____.

The Coase Theorem implies that _____.

The Coase Theorem implies that when there are no costs to trading,_____.

There are likely to be low transactions costs when _____.

If transactions costs are high and the number of individuals involved is large,then the assignment of property rights _____.

In Coase's case of the doctor and the confectioner,who or what caused the negative situation?

In the context of the Coase theorem,the reciprocal nature of the problem is the fact that _____.