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Chapter 12: Q.22 (page 297)

What are better-defined property rights and what incentive do they provide to account for external costs?

Short Answer

Expert verified

Property rights are legal ownership rights that others do not appear to be able to infringe on without paying a charge.
It incentivises acorporation to decrease pollution costs by compensating another company or aprivate whose property has been polluted.

Step by step solution

01

Introduction

Property rights are a kind of legal ownership right that prohibits others from infringing on the owner's property without paying recompense.

02

Explanation

Property rights aid in achieving a healthy balance of economic activity and pollution. Property rights would be unable to deal with the rights of what's seen as a right of ownership thatmay be infringed until compensation is paid. Farmers that burn their fields have property rights totryanddo so, but theinducement to churn it insteadof burn it's considered an external cost.

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Most popular questions from this chapter

Technological innovations shift the production

possibility curve. Look at graph you sketched for

Exercise 12.13 Which types of technologies should

a country promote? Should “clean” technologies be

promoted over other technologies? Why or why not?

Consider two ways of protecting elephants from poachers in African countries. In one approach, the government sets up enormous national parks that have sufficient habitat for elephants to thrive and forbids all local people to enter the parks or to injure either the elephants or their habitat in any way. In a second approach, the government sets up the national parks and designates 10villages around the edges of the park as official tourist centers that become places where tourists can stay and bases for guided tours inside the national park. Consider the different incentives of local villagers - who often are very poor - in each of these plans. Which plan seems more likely to help the elephant population?

Will a system of marketable permits work with thousands of firms? Why or why not?

The state of Colorado requires oil and gas companies who use fracking techniques to return the land to its original condition after the oil and gas extractions. Table 12.9shows the total cost and total benefits (in dollars) of this policy.

Table12.9

Land Restored (in acres)Total CostTotal Benefit
0\(0\)0
100\(20\)140
200\(80\)240
300\(160\)320
400\(280\)380

(a) Calculate the marginal cost and the marginal benefit at each quantity (acre) of land restored. See Production, Costs and Industry Structure if you need a refresher on how to calculate marginal costs and benefits.

b. If we apply marginal analysis, what is the optimal amount of land to be restored?

An emissions tax on a quantity of emissions from a firm is not a command-and-control approach to reducing pollution. Why?
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