Using the Coase theorem, why might a firm that currently pollutes a river no one owns pollute the river less if it owned the river?
What will be an ideal response?
The firm would pollute less if it owned the river because its neighbors could compensate the firm if it limits its pollution. If the firm pollutes beyond this limit, it would lose that payment from neighbors and, thereby, incur the cost of polluting.
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The “cradle to cradle” approach to materials and waste management
a. involves a linear flow of materials and wastes b. involves a cyclical flow of materials and wastes c. acknowledges design for recycling in the waste management process d. none of the above e. (b) and (c) only
In the short run, when a firm stops producing it:
A. must be that ATC is lower than market price. B. can avoid earning profits less than zero. C. avoids paying variable costs. D. avoids paying fixed costs.
Which of the following correctly describes the time-inconsistency problem?
a. The problem that arises when policy makers have an incentive to announce one policy to influence expectations, but then pursue different policy once those expectations have been formed and acted on. b. The problem that arises when the president and Congress have an incentive to pursue policies that are different from those of the Fed. c. The problem that arises when consumer preferences change frequently over time such that a product considered highly desirable at one point would be considered undesirable after sometime. d. The problem that arises when firms increase supply of a product in anticipation of future increase in demand for the product, but suffers a heavy loss because of a steep fall in demand.
Suppose Caesar allocates his entire budget to the purchase of soft drinks and chips. The marginal utility of the last bottle of soft drink purchased is 12 utils, and each bottle costs $1.20. The marginal utility of the last bag of chips purchased is 8 utils, and each bag costs $1. In order to maximize his utility, Caesar should
A. Buy more soft drinks and fewer chips because the soft drink has fewer calories. B. Buy more chips and fewer soft drinks because of the lower price for chips. C. Not change anything because he has made the choice that gives him the most total utility. D. Buy more soft drinks and fewer chips since he gets more marginal utility per dollar from soft drinks.