Question

5)Despite having clearly assigned property rights, private bargaining can fail to achieve the socially optimal level of emissions when ________.

a)all of the choices are correct

b)property owners are unable to capture social values due to restrictions on use

c)transaction costs are too high due to the necessity to include many parties in the negotiations

d)the resource is an open-access good

6)The fact that ________ is NOT one of the conditions that limits the ability of liability laws to lead to an efficient level of pollution?

a)transaction costs inhibit negotiation and legal action

b)there are problems meeting the burden of proof

c)very few people are involved

d)there is difficulty in obtaining legal standing

7)Which of the following is not one of the three conditions that must be satisfied in order for property rights to lead to social efficiency in the case of environmental problems?

a)There is a system in place where interested parties can come together to negotiate the use of environmental property rights.

b)Private owners are able to capture all the social values associated with an environmental asset through markets.

c)Individuals have open access to the environmental resource.

d)Property rights are well defined, enforceable and transferrable.

8) Liability laws can help lead to the efficient level of pollution when many people are involved, causal linkages are clear and damages are easy to measure.

True or False

Answer 1

For question 5 -

Statement - Despite having clearly assigned property rights, private bargaining can fail to achieve the socially optimal level of emissions when

Answer - a) all of the choices are correct

Explanation - Private bargaining includes private means to avoid negative externalities like emissions. Even in the case of clearly assigned property rights, it could be difficult for private bargaining to curb negative externalities as many times these externalities are difficult to be quantified in terms of social values. Additionally, the transaction costs could be too high as well. The involvement of various parties also make the costs and duration to go up.