Externalities exist becauseGroup of answer choicesthere is too much private ownership of property.owners of private property are not able to trade with others.owners of private property have an incentive to maintain their property.owners of private property have little incentive to protect their property.property rights are not clearly defined.
Question
Externalities exist becauseGroup of answer choicesthere is too much private ownership of property.owners of private property are not able to trade with others.owners of private property have an incentive to maintain their property.owners of private property have little incentive to protect their property.property rights are not clearly defined.
Solution
Externalities exist because property rights are not clearly defined.
Here's a step-by-step explanation:
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An externality is a cost or benefit that affects a party who did not choose to incur that cost or benefit.
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When property rights are clearly defined and enforceable, parties involved in the use of that property have the incentive to negotiate the level of externalities (if any).
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However, when property rights are not clearly defined, it's difficult to enforce them. This means that the parties involved may not have the incentive to negotiate the level of externalities.
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As a result, one party may use the property in a way that imposes costs (negative externalities) or benefits (positive externalities) on others, without taking these into account in their decision-making process. This is why externalities exist.
Similar Questions
Externalities are minimized ifGroup of answer choicesthe government owns all of the productive resources.there are no private goods.private property rights are well established.there are no public goods.there are no free-riders.
Externality: What It Means in Economics
Multiple Choice QuestionIf property rights are clearly defined can the economy still experience externalities?Multiple choice question.Yes. The economy could experience scarcity.Yes. Transaction costs could be significant.No. The economy reaches equilibrium.No. Clearly-defined property rights eliminates scarcity.
occur when property rights are not clearly defined.Multiple choice question.ExternalitiesShortagesSurplusesProfits
Why do externalities mainly lead to market failure? Select the best possible option.The price equilibrium for a certain good or service does not accurately reflect the real cost or real benefit of that good or service.The benefactor of the externalities has no control over and does not choose to incur either the cost or the benefit.Individual incentives that drive market decisions may increase social costs.All of the above.
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