If the government assigns private property rights to a common resource, then the
A) marginal private cost becomes equal to the marginal social cost.
B) resource is underutilised.
C) government needs to set a quota to achieve efficiency.
D) None of the above answers is correct.

Question

Quizplus · Accepted Answer

When the government assigns private property rights to a common resource, it aligns the incentives of the private owners with the social interest. The owners have an incentive to use the resource efficiently, as overuse would diminish its value to them. This alignment makes the marginal private cost (the cost to the owner for using one more unit of the resource) equal to the marginal social cost (the cost to society of using one more unit of the resource), promoting efficient use of the resource.

If the Government Assigns Private Property Rights to a Common