Question

oase Theorem suggests one way in which the problem of externalities can be solved. However, the theorem has its practical limitations. From the scenarios given below, which is the best candidate for Coase-like solution?

Paul is annoyed by the loud music played by his neighbor.

Manufacturing plants in the Midwest emit sulfur dioxide which causes acid rain in Canada.

Carbon emissions from coal power plants in China contribute to climate change of the planet.

All of the above are equally good candidates for Coase-like solution.

National defense is often given as a classic example of a public good. Which of the following is/are the reason(s) for doing so?

Private security services cannot purchase war planes or ships.

If one American resident benefits from national defense, it does not mean that another American resident benefits any less from it.

it is very difficult to exclude people from benefiting from national defense once it is provided.

Both b and c are the reasons for giving national defense as a classic example of a public good.

National defense is often given as a classic example of a public good. Which of the following is/are the reason(s) for doing so?

Answer 1

Paul is annoyed by the loud music played by his neighbor. this the best candidate for Coase-like solution. as we know The coas theorem states that in case of conflicting property rights bargaining between parties involved will lead to an efficirnt solution regardless of the party which ultimately awarded the property right, as long as the transaction cost associated is zero. in this example paul can bargain with the neighbourhood to stop playing loud music and the two parties will get one solution eventually.

Both b and c are the reasons for giving national defense as a classic example of a public good because as we know public goods are characterised as non rivalary and non excludable here If one American resident benefits from national defense, it does not mean that another American resident benefits any less from it. the statement signifies non rivaliraty and it is very difficult to exclude people from benefiting from national defense once it is provided is the example of non excludability. so both the statement shows why national diffence is considered as public good.