Question

QUESTION 7 Suppose you often come home and find that an uninvited dog has left a calling card in your yard. Determining whose dog is responsible is an example of which of the following? Holdout problem Assignment problem Free-rider problem Externality-internalization problem Transaction costs and negotiating problems 1 points Save Answer QUESTION 8 Which of the following suggests that when an investment has a personal cost but a common benefit, individuals will underinvest? O Holdout problem Assignment problem Free-rider problem Externality-internalization problem Transaction costs and negotiating problems

Answer 1

7):-B is right option, Assignment problem

Suppose you often come home and find that an uninvited dog has left a calling card in your yard. Determining whose dog is responsible is an example of Assignment problem.

The assignment problem is a special case of the transportation problem. In which one agent is assigned to one and only one task

each supply and demand value is 1 in the assignment problem

8) :-Free-rider problem

Free-rider problem suggests that when an investment has a personal cost but a common benefit, individuals will underinvestunderinvest.

If many (not all) people work towards achieving a collective goal, everyone is better off. Every who pays, gains. But people who do not pay (free riders) also benefit.
Everyone also has an individual incentive not to cooperate towards collective goal and is aware that others have that incentive as well. Thought process: everyone else pays, but you gain.
Definition of free rider is that Collective goods problem where people benefit from a collective good without paying a share of the cost to produce that good.

Ex: Public radio (NPR — everyone benefits but only a small number actually donate to NPR)

9) :-Internalizing the externality is difficult

Corrective taxation  is best used when Internalizing the externality is difficult.

Corrective Action is defined as a method used to resolve an issue in phases-containment, root cause analysis, permanent corrective action and verification of effectiveness.

Internalizing the Externality is defined as the Tax that gives buyers and sellers in the market an incentive to take into account the external effects of their actions.

9) :-The government cannot allocate property rights.

Corrective taxation is best used when The government cannot allocate property rights.

Corrective Taxes

Pigovian Taxes is defined as tax designed to induce private decision makers to take account of the social costs that arise from a negative externality
Corrective tax equals external cost from activity with negative externalities
Corrective taxes reduce externalities (pollution) at a lower cost to society- more efficiently- places a price on the right to pollute and allocates pollution to those factories that face the highest cost of reducing it.
Better for environment- regulations have no incentive to further reduce emission after specified regulation.
Unlike most taxes- corrective tax alters incentives to account for externalities and moves allocation of resources closer to social optimum. They raise money for government and enhance economic efficiency

10) :-Shift the private demand curve to the left

If SUVs produce a negative externality, taxing the buyers of SUVs would Shift the private demand curve to the left

11) :-too little

Complete the following sentence so that it ALWAYS holds true: In the presence of a positive production externality, too little produced relative to the optimal level