To ascertain: Difference between the two situation and reason for inefficient allocation of resources in second situation but not in first.

Question

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Answer 1

Question

Chapter 16, Problem 1RQ

To determine

To ascertain:Difference between the two situation and reason for inefficient allocation of resources in second situation but not in first.

Expert Solution & Answer

Answer to Problem 1RQ

First situation is not externality as property rights are undefined while second situation is externality.

Explanation of Solution

Externality arises when benefits or negative impact of a person is borne or enjoyed by other person without any aid or compensation. This usually occurs because property rights are not defined properly. One of the ways to assign property rights is bidding. It is a process in which the person who gives the maximum value to a commodity gets the right of the commodity. The bid gets higher and higher due to competition not because on any negative damage done to environment.

On the other hand, in the case of pollution, the social cost is higher than the private cost. Environmental degradation causes negative externalities on other firms, which may resort to taking remedial actions. It is very difficult to quantify the cost of externality and to penalize the polluting firms until the property rights are rigidly defined. Price mechanism does not offer a solution to this problem. In negative externality, the optimum production level is lower than the individual optimum output.

Economics Concept Introduction

Introduction:

Externality is a situation in which one’s activity directly or indirectly affects other party. There are two types of externality: Positive and negative externality. Positive externality is a situation in which action of one’s party gives benefit to other parties without asking for any rebate. Negative externality is a situation in which actions of one party harms other parties.

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Answer 2

Question

Chapter 16, Problem 1RQ

To determine

To ascertain:Difference between the two situation and reason for inefficient allocation of resources in second situation but not in first.

Expert Solution & Answer

Answer to Problem 1RQ

First situation is not externality as property rights are undefined while second situation is externality.

Explanation of Solution

Externality arises when benefits or negative impact of a person is borne or enjoyed by other person without any aid or compensation. This usually occurs because property rights are not defined properly. One of the ways to assign property rights is bidding. It is a process in which the person who gives the maximum value to a commodity gets the right of the commodity. The bid gets higher and higher due to competition not because on any negative damage done to environment.

On the other hand, in the case of pollution, the social cost is higher than the private cost. Environmental degradation causes negative externalities on other firms, which may resort to taking remedial actions. It is very difficult to quantify the cost of externality and to penalize the polluting firms until the property rights are rigidly defined. Price mechanism does not offer a solution to this problem. In negative externality, the optimum production level is lower than the individual optimum output.

Economics Concept Introduction

Introduction:

Externality is a situation in which one’s activity directly or indirectly affects other party. There are two types of externality: Positive and negative externality. Positive externality is a situation in which action of one’s party gives benefit to other parties without asking for any rebate. Negative externality is a situation in which actions of one party harms other parties.

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Answer 3

Question

Chapter 16, Problem 1RQ

To determine

To ascertain:Difference between the two situation and reason for inefficient allocation of resources in second situation but not in first.

Expert Solution & Answer

Answer to Problem 1RQ

First situation is not externality as property rights are undefined while second situation is externality.

Explanation of Solution

Externality arises when benefits or negative impact of a person is borne or enjoyed by other person without any aid or compensation. This usually occurs because property rights are not defined properly. One of the ways to assign property rights is bidding. It is a process in which the person who gives the maximum value to a commodity gets the right of the commodity. The bid gets higher and higher due to competition not because on any negative damage done to environment.

On the other hand, in the case of pollution, the social cost is higher than the private cost. Environmental degradation causes negative externalities on other firms, which may resort to taking remedial actions. It is very difficult to quantify the cost of externality and to penalize the polluting firms until the property rights are rigidly defined. Price mechanism does not offer a solution to this problem. In negative externality, the optimum production level is lower than the individual optimum output.

Economics Concept Introduction

Introduction:

Externality is a situation in which one’s activity directly or indirectly affects other party. There are two types of externality: Positive and negative externality. Positive externality is a situation in which action of one’s party gives benefit to other parties without asking for any rebate. Negative externality is a situation in which actions of one party harms other parties.

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Answer 4

Question

Chapter 16, Problem 1RQ

To determine

To ascertain:Difference between the two situation and reason for inefficient allocation of resources in second situation but not in first.

Expert Solution & Answer

Answer to Problem 1RQ

First situation is not externality as property rights are undefined while second situation is externality.

Explanation of Solution

Externality arises when benefits or negative impact of a person is borne or enjoyed by other person without any aid or compensation. This usually occurs because property rights are not defined properly. One of the ways to assign property rights is bidding. It is a process in which the person who gives the maximum value to a commodity gets the right of the commodity. The bid gets higher and higher due to competition not because on any negative damage done to environment.

On the other hand, in the case of pollution, the social cost is higher than the private cost. Environmental degradation causes negative externalities on other firms, which may resort to taking remedial actions. It is very difficult to quantify the cost of externality and to penalize the polluting firms until the property rights are rigidly defined. Price mechanism does not offer a solution to this problem. In negative externality, the optimum production level is lower than the individual optimum output.

Economics Concept Introduction

Introduction:

Externality is a situation in which one’s activity directly or indirectly affects other party. There are two types of externality: Positive and negative externality. Positive externality is a situation in which action of one’s party gives benefit to other parties without asking for any rebate. Negative externality is a situation in which actions of one party harms other parties.

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Answer 5

Chapter 16, Problem 1RQ

To determine

To ascertain:Difference between the two situation and reason for inefficient allocation of resources in second situation but not in first.

Expert Solution & Answer

Answer to Problem 1RQ

First situation is not externality as property rights are undefined while second situation is externality.

Explanation of Solution

Externality arises when benefits or negative impact of a person is borne or enjoyed by other person without any aid or compensation. This usually occurs because property rights are not defined properly. One of the ways to assign property rights is bidding. It is a process in which the person who gives the maximum value to a commodity gets the right of the commodity. The bid gets higher and higher due to competition not because on any negative damage done to environment.

On the other hand, in the case of pollution, the social cost is higher than the private cost. Environmental degradation causes negative externalities on other firms, which may resort to taking remedial actions. It is very difficult to quantify the cost of externality and to penalize the polluting firms until the property rights are rigidly defined. Price mechanism does not offer a solution to this problem. In negative externality, the optimum production level is lower than the individual optimum output.

Economics Concept Introduction

Introduction:

Externality is a situation in which one’s activity directly or indirectly affects other party. There are two types of externality: Positive and negative externality. Positive externality is a situation in which action of one’s party gives benefit to other parties without asking for any rebate. Negative externality is a situation in which actions of one party harms other parties.

Answer 6

Chapter 16, Problem 1RQ

To determine

To ascertain:Difference between the two situation and reason for inefficient allocation of resources in second situation but not in first.

Expert Solution & Answer

Answer to Problem 1RQ

First situation is not externality as property rights are undefined while second situation is externality.

Explanation of Solution

Externality arises when benefits or negative impact of a person is borne or enjoyed by other person without any aid or compensation. This usually occurs because property rights are not defined properly. One of the ways to assign property rights is bidding. It is a process in which the person who gives the maximum value to a commodity gets the right of the commodity. The bid gets higher and higher due to competition not because on any negative damage done to environment.

On the other hand, in the case of pollution, the social cost is higher than the private cost. Environmental degradation causes negative externalities on other firms, which may resort to taking remedial actions. It is very difficult to quantify the cost of externality and to penalize the polluting firms until the property rights are rigidly defined. Price mechanism does not offer a solution to this problem. In negative externality, the optimum production level is lower than the individual optimum output.

Economics Concept Introduction

Introduction:

Externality is a situation in which one’s activity directly or indirectly affects other party. There are two types of externality: Positive and negative externality. Positive externality is a situation in which action of one’s party gives benefit to other parties without asking for any rebate. Negative externality is a situation in which actions of one party harms other parties.

Answer 7

Chapter 16, Problem 1RQ

To determine

To ascertain:Difference between the two situation and reason for inefficient allocation of resources in second situation but not in first.

Answer 8

Expert Solution & Answer

Answer to Problem 1RQ

First situation is not externality as property rights are undefined while second situation is externality.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

Externality arises when benefits or negative impact of a person is borne or enjoyed by other person without any aid or compensation. This usually occurs because property rights are not defined properly. One of the ways to assign property rights is bidding. It is a process in which the person who gives the maximum value to a commodity gets the right of the commodity. The bid gets higher and higher due to competition not because on any negative damage done to environment.

On the other hand, in the case of pollution, the social cost is higher than the private cost. Environmental degradation causes negative externalities on other firms, which may resort to taking remedial actions. It is very difficult to quantify the cost of externality and to penalize the polluting firms until the property rights are rigidly defined. Price mechanism does not offer a solution to this problem. In negative externality, the optimum production level is lower than the individual optimum output.

Answer 12

Economics Concept Introduction

Introduction:

Externality is a situation in which one’s activity directly or indirectly affects other party. There are two types of externality: Positive and negative externality. Positive externality is a situation in which action of one’s party gives benefit to other parties without asking for any rebate. Negative externality is a situation in which actions of one party harms other parties.

Answer 13

Ch. 16.2 - Prob. 1TTA Ch. 16.2 - Prob. 2TTA Ch. 16.2 - Prob. 1MQ Ch. 16.3 - Prob. 1MQ Ch. 16.3 - Prob. 2MQ Ch. 16.3 - Prob. 1TTA Ch. 16.3 - Prob. 2TTA Ch. 16.4 - Prob. 1MQ Ch. 16.4 - Prob. 2MQ Ch. 16.7 - Prob. 1MQ

To ascertain: Difference between the two situation and reason for inefficient allocation of resources in second situation but not in first.

To ascertain:Difference between the two situation and reason for inefficient allocation of resources in second situation but not in first.

Answer to Problem 1RQ

Explanation of Solution

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Chapter 16 Solutions