Consider a local factory that pollutes a nearby stream.Local fishers may be unable to negotiate a deal with the local factory to eliminate the negative externality because:
A)the fishers' cost will never exceed the factory's benefit from polluting the stream
B)the local law gives the factory the right to pollute
C)the cost of coordinating the fishers into one bargaining body is too large
D)some of the local fishers work at the factory

Question

Quizplus · Accepted Answer

The cost of coordinating the fishers into one bargaining body can be too large, making it difficult for them to effectively negotiate with the factory. This is an example of a collective action problem, where the individual interests and logistical challenges prevent a group from coordinating to address a common issue.

Consider a Local Factory That Pollutes a Nearby Stream