Refer to the information provided in Figure 16.4 below to answer the question(s) that follow.Los Angeles International Airport (LAX) is located next to Playa Del Rey. The noise from air traffic negatively affects individuals living in Playa Del Rey, however, this cost is not considered by airlines or air travelers. The airlines feel they have a right to use the airspace while the individuals living in Playa Del Rey feel they have the right to quiet. The following diagram depicts the marginal costs and marginal benefits associated with air travel.
Figure 16.4Refer to Figure 16.4. Suppose the government assigns property rights to ________. No negotiations
occur between the parties. The resulting level of air travel is 0 units.
A. both the airlines and the residents of Playa Del Rey in a 50-50 split
B. the airlines
C. the residents of Playa Del Rey
D. indeterminate from the given information.
Answer: C
You might also like to view...
When the tax rates imposed on the rich are high, a reduction in these rates
a. will always lead to a reduction in the tax revenue collected from the rich. b. will not affect the tax revenue collected from the rich. c. will increase the reported incomes of the rich and it may also lead to an increase in tax revenue collected from them. d. will decrease the reported incomes of the rich, and thereby reduce the tax revenue collected from them.
Stockholders of ComfortAir Corporation, an air conditioner and furnace manufacturer, are concerned that the companies executives may take on greater risks than stockholders desire. This example illustrates
a. moral hazard and market risk. b. moral hazard and firm specific risk. c. adverse selection and market risk. d. adverse selection and firm specific risk.
Which of the following refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product?
a. price setter b. business entity c. price taker d. trend setter
Mechanism design can be used to provide employers and employees with the right incentives in labor markets.
Answer the following statement true (T) or false (F)