ECON 102: Homework 06. Questions and Answers
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HOMEWORK # 6-ECON 102 Question 1: 2 / 2 pts. If private bargaining to resolve an externality is to result in an efficient outcome, a. rights must be protected by liability rules. b. there must be d irect regulation of externalities. c. the initial assignment of rights must be clear to both parties. d. there must be tradable pollution rights. Question 2: 2 / 2 pts. The Coase theorem will apply only if a. the courts can be used to determine the amount of compensation that must be made to the damaged party. b. an individual who is not affected by the externality can negotiate a settlement between the parties imposing the externality and the parties that are harmed by the externality. c. the amount of compensation that must be made to the damaged party is small. d. the number of people involved is small. Question 3: 2 / 2 pts. In any case where there is a negative externality, it is better to form a government agency to solve the problem. a. FALSE b. TRUE Question 4: 2 / 2 pts. According to the Coase theorem, bargaining will bring the contending parties to the solution only if the rights are initially assigned to the party causing the externality. a. TRUE b. FALSE Question 5: 2 / 2 pts. A radio signal broadcast through the air is ________ in consumption and listeners are ________. a. nonrival; excludable b. rival; nonexcludable c. nonrival; nonexcludable d. rival; excludable Question 6: 2 / 2 pts. Private goods are a. rival in consumption and their benefits are nonexcludable. b. nonrival in consumption and their benefits are nonexcludable. c. rival i