Question 1

All the costs associated with making,reaching,and enforcing agreements are called

Accepted Answer

Transaction costs include all the costs associated with making, reaching, and enforcing agreements. Private costs refer to costs borne by an individual or a firm while social costs are borne by the society as a whole. Internal costs refer to the costs incurred by a firm for its own internal operations.

Question 2

When no property rights exist,

Accepted Answer

Without property rights, there is no clear ownership or control over common property, which can lead to the tragedy of the commons where individuals have no economic incentive to conserve and preserve these shared resources. This can result in externalities, such as overuse or depletion of the resource, which can harm others in the community.

Question 3

Suppose people value clean air more as their incomes increase.What would happen to the optimal amount of clean air as a country develops economically? Is there an economic prediction we can make from this?

Accepted Answer

The answer of Suppose people value clean air more as...

Question 4

Common property is

Accepted Answer

Common property refers to a resource that is available to everyone to use as much as they need or want. Examples include air, water, and fisheries. It is not necessarily associated with mineral or oil deposits (A), nor does it need to be owned by a group (C) or have little economic value (D).

Question 5

In general,pollution exists if

Accepted Answer

The answer of In general,pollution exists if
...

Question 6

Buffalo in the United States almost became extinct while cattle have never been close to extinction.The difference is due to

Accepted Answer

The primary reason buffalo almost became extinct while cattle did not is due to the use of private property rights on cattle, which provided incentives for their preservation and sustainable management, whereas buffalo were subject to common property rights, leading to overexploitation and near extinction.

Question 7

The exclusive rights of ownership that allow the use,transfer,and exchange of property are called

Accepted Answer

Private property rights refer to the exclusive rights of ownership that allow individuals to use, transfer, and exchange their property. This includes both tangible assets like land, buildings, and commodities as well as intangible assets like intellectual property. Common property rights refer to shared ownership of a resource, while externalities refer to the spillover costs or benefits of an economic activity. Social benefits refer to the overall positive impacts of an economic activity on society as a whole.

Question 8

When negative externalities exist,a voluntary agreement can be negotiated.Which of the following statements is true?

Accepted Answer

For a voluntary agreement to be successful, the expected benefits of reaching an agreement must outweigh the transaction costs of negotiating and enforcing the agreement. The option A is incorrect because the owner may have incentives to negotiate if they believe it will benefit them in the long run. Option C is incorrect because voluntary agreements do not involve government intervention. Option D is incorrect because a voluntary agreement can result in a mutually beneficial outcome for both parties involved.

Question 9

Common property ownership most likely leads to

Accepted Answer

The answer of Common property ownership most likely leads to
...

Question 10

Economic theory suggests that if natural resources can be held as private property,then

Accepted Answer

When natural resources are held as private property, the owners have an incentive to maintain the value of those resources for future use or resale. This can lead to more responsible stewardship of the resources and increased conservation efforts in order to protect their value.

Question 11

Why do economists believe that it is socially optimal to have some amount of pollution?

Accepted Answer

The answer of Why do economists believe that it is...

Question 12

Government intervention will not be necessary when voluntary contracting internalizes an externality.Which of the following is NOT a necessary condition for this to occur?

Accepted Answer

Large numbers of individuals involved in the transactions may create difficulties in negotiating and enforcing contracts, making it more difficult to internalize externalities through voluntary contracting. Therefore, this is not a necessary condition for government intervention to be unnecessary. The other options are necessary conditions for voluntary contracting to internalize externalities. Well-defined private property rights ensure clear ownership and responsibility for any externalities, low transaction costs make it easier for parties to negotiate and enforce contracts, and low contract enforcement costs make it more feasible for parties to take legal action to enforce contracts.

Question 13

One difficulty in using voluntary transactions to internalize externalities is that

Accepted Answer

Transaction costs refer to the costs of making a transaction or coming to an agreement. When numerous parties are involved in internalizing an externality, it can be difficult and costly to reach an agreement through voluntary transactions. This is because each individual must negotiate with every other individual involved in the externality, making the process lengthy and expensive. Therefore, transaction costs can hinder the effectiveness of voluntary transactions in internalizing externalities.

Question 14

Transaction costs are

Accepted Answer

Transaction costs refer to the costs associated with making, reaching, and enforcing agreements. These costs include negotiating, monitoring, and enforcing contracts, as well as information gathering and processing. Such costs can be significant and are a barrier to efficient market transactions.

Question 15

The costs associated with reaching and enforcing agreements are called

Accepted Answer

The costs associated with reaching and enforcing agreements are called transaction costs. Private property costs refer to the costs incurred by an individual in acquiring and protecting private property. Common property costs refer to the costs incurred in managing and maintaining common resources, while public costs refer to the costs associated with public goods and services provided by the government.

Question 16

With defined property rights,an externality

Accepted Answer

With well-defined property rights, parties may engage in voluntary contracting to internalize the externality. For example, a firm that emits pollution may enter into a contract with a neighboring firm or individual to compensate for the negative effects of the pollution on their property or health. This allows market forces to address the externality without the need for government intervention. Options A, B, and D are not accurate because correcting externalities may involve various mechanisms beyond government intervention or could still result in misallocation of resources or production outside of the production possibilities frontier.

Question 17

A farmer notices that a neighboring rancher's cattle are wandering and destroying some of his crops.The farmer decides to offer a payment to the rancher if the rancher will reduce the size of his herd.By doing so,the farmer

Accepted Answer

By offering a payment to the rancher to reduce the size of his herd, the farmer is internalizing the externality of the rancher's cattle wandering and destroying crops. The payment acts as an opportunity cost for the rancher to keep a larger herd. This also encourages the rancher to consider the negative impact his actions are having on the farmer's crops and possibly adjust his behavior.

Question 18

The crux of the problem of pollution is

Accepted Answer

Poorly defined property rights lead to a tragedy of the commons situation, where individuals and businesses have little incentive to avoid polluting because the costs of pollution are not fully borne by them. This can result in overuse and degradation of natural resources, which can be expensive to remedy. The other options (A, B, and C) may contribute to pollution but are not the crux of the problem.

Question 19

Private property rights involve

Accepted Answer

Private property rights involve the exclusive rights to use, transfer, and exchange the property. This means that individuals or entities who own private property have the right to use it as they see fit, transfer it to others, and exchange it for other types of property or currency.

Question 20

Which of the following would be viewed as a common property problem?

Accepted Answer

Common property problems involve the overuse or depletion of resources that are owned by no one or owned by a group. People picking all the flowers in a public park is an example of overuse or depletion of a resource owned by no one. Burglary, vandalism, and locking your doors at night are not common property problems.

Quiz 18: Environmental Economics