Suppose that a chicken farm uses a nearby stream to dispose of the wastes released by its chickens. These wastes flow downstream into a lake that has become thick with algae and polluted due to the minerals in the waste matter. The local office of a nonprofit environmental organization successfully lobbies state regulators to stop the farm's pollution.
Which of the following types of private solutions to the externality of pollution has occurred in this case?
A) Moral codes and social sanctions
B) Integration of different types of businesses
C) Charities
D) Contracts
Its important to note that sometimes private solutions to externalities do not work. For example, this occurs when one party repeatedly holds out for a better deal. This describes the problem of:
A) Property held in common
B) A breakdown in bargaining
C) Transaction costs
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Suppose that a chicken farm uses a nearby stream to dispose of the wastes released by its chickens....
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