Suppose there are ten people playing cards in a room. One of them wants to smoke a cigar, nine of them dislike the smell of cigar smoke. The smoker values the privilege of smoking at $5, and each of the other nine people of the room would be willing to pay fifty cents for clean air in the room. The rules governing use of the room state that smoking is not allowed unless everyone agrees to allow smoking. If the rules governing the room instead stated that smoking is allowed unless everyone in the room agrees to prohibit it, then:
A. the non-smoking occupants will pay the cigar smoker to not smoke.
B. the cigar smoker will smoke and not have to pay the other occupants for the external cost.
C. the parties may or may not be able to reach a negotiated agreement depending on the bargaining strength of each.
D. the cigar smoker will smoke, and will pay each other occupant 50 cents.
Answer: B
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Members of the Board of Governors
A) must resign when the President who has appointed them leaves office. B) may serve no more than three consecutive four-year terms. C) serve for life or good behavior. D) serve one nonrenewable fourteen-year term.
A college has found that during every home football game, a group of students sits on a hillside next to the stadium and watches the game without purchasing tickets. In economics, the problem that this college is facing is referred to as a
a. common good problem. b. free rider problem. c. onlooker problem. d. deadweight loss problem.
"High-income countries have a price level which is much higher than the low-income countries." Which of the following is most likely to explain this price differential?
A. Prices of non-traded goods and services are relatively stable across high- and low-income nations. B. Traded goods are much more sensitive to the income levels than are non-traded goods and services. C. With the development process of a nation, its productivity in making traded goods rises much faster than that in making non-traded goods. D. Labor involved in production of non-traded goods and services in high-income nations receives lower wages than the labor-producing traded goods.
The potential money multiplier for the banking system in the above table is
A. 5. B. 1. C. 10. D. 9.