Review three methods that might achieve the efficient use of a common resource and explain the obstacles to efficiency
What will be an ideal response?
There are three different methods that government can use to obtain the efficient allocation of resources in the event of a common resource:
• Property Rights are assigned to private property, which is a resource that someone owns and has an incentive to use in a way that maximizes its value. However, assigning property rights to resources is not always feasible, such as with the fish that migrate over the vast depths of the oceans.
• Production Quotas can be set for total catch and divided among harvesting consumers so that the marginal social benefit from harvesting equals the marginal social cost of harvesting. However, it is in every harvester's best interest to cheat on the quota, because marginal private benefit from exceeding the quota allotment is greater than the marginal cost of harvesting.
• An Individual Transferable Quotas (ITQ) is a production limit that is assigned to an individual harvester who is free to transfer the quota to someone else.
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Most economists believe that classical theory describes the world in the short run but not in the long run
a. True b. False Indicate whether the statement is true or false
Vertical integration:
A. is a spot exchange phenomenon. B. occurs when a firm produces its own inputs. C. occurs when a firm purchases its inputs in a market. D. is attractive when relationship-specific exchange is unimportant.
The demand curve for the product of a monopolistically competitive firm
A. is unitary elastic. B. is perfectly inelastic. C. is perfectly elastic. D. is downward sloping.
Firms are organizations that
A. transform outputs into inputs. B. take advantage of the public. C. demand consumer outputs. D. transform resources into products.