Suppose that factories in Chicago,Illinois,and Gary,Indiana,produce pollution that affects people living in western Michigan.Even though the polluting plants and affected individuals can be identified,the externality cannot be resolved privately because of the large number of both polluters and affected individuals.This is an example of:

Question

Quizplus · Accepted Answer

This scenario illustrates transaction costs and negotiating problems because the large number of both polluters and affected individuals makes it difficult and costly to negotiate a solution to the externality.

Suppose That Factories in Chicago,Illinois,and Gary,Indiana,produce Pollution That Affects People