To internalize a negative externality an appropriate public policy response would be to ?

Tradable pollution permits ?

A. reduce the incentive for technological innovations to further reduce pollution.

B. set the price of pollution.

C. determine the demand for pollution rights.

D. Set the quantity of pollution

The gas-guzzler tax that is placed on new vehicles that are very fuel inefficient is an example of ?

A. a tradeable pollution permits.

B. an attempt to internalize a positive externality

C. an application of the Coase theorem

D. an attempt to internalize a negative externality.

Roberto and Thomas live in a university hall of residence. Reberto values playing loud music at a value of €100. Thomas values peace and quiet at a value of €150. Which of the following statements is true about an efficient solution to this externality problem if Roberto has the right to play loud music and if there are no transaction costs ?

A. Thomas will pay Roberto between €100 and €150 and Roberto will continue to play loud music

B. Roberto will pay Thomas €150 and Roberto will continue to play loud music

C. Thomas will pay Roberto between €100 and €150 and Roberto will stop playing loud music

D. Roberto will pay Thomas €100 and Roberto will stop playing loud music

Which of the following is not considered a transaction cost incurred by parties in the process of contracting to eliminate a pollution externality ?

A. costs incurred due to lawyers’ fees

B. costs incurred to reduce the pollution

C. costs incurred to enforce the agreement

D. costs incurred due to a large number of parties affected by the externality

E. All of these answers are considered transaction costs

According to the Coase theorem, private parties can solve the problem of externalities if ?

A. there are no transaction costs.

B. each affected party has equal power in the negotiations.

C. the party affected by the externality has the initial property right to be left alone.

D. There are a large number of affected parties.

E. the government requires them to negotiate with each other