31.Whateconomicargumentsuggeststhatiftransactionscostsaresufficientlylow,theequilibriumiseconomicallyefficientregardlessofhowpropertyrightsaredistributed?
a.theCoasetheorem
b.thelawsofsupplyanddemand
c.thelawofcomparativeadvantage
d.thelawofexternalities
32.TheCoasetheoremstatesthat
a.taxesareanefficientwayforgovernmentstoremedynegativeexternalities.
b.subsidiesareanefficientwayforgovernmentstoremedypositiveexternalities.
c.industrialpoliciesencouragetechnologyspillovers.
d.intheabsenceoftransactioncosts,privatepartiescansolvetheproblemofexternalitiesontheirown.
33.MaryandCathyareroommates.Maryassignsa$30valuetosmokingcigarettes.Cathyvaluessmoke-freeairat
a.CathyoffersMary$20nottosmoke.Maryacceptsanddoesnotsmoke.
b.MarypaysCathy$16sothatMarycansmoke.
c.MarypaysCathy$14sothatMarycansmoke.
d.CathyoffersMary$15nottosmoke.Maryacceptsanddoesnotsmoke.
34.Adentistsharesanofficebuildingwitharadiostation.Theelectricalcurrentfromthedentist’sdrillcausesstaticintheradiobroadcast,causingtheradiostationtolose$10,000inprofits.Theradiostationcouldputupashieldatacostof$30,000;thedentistcouldbuyanewdrillthatcauseslessinterferencefor$6,000.Eitherwouldrestoretheradiostation’slostprofits.Whatistheeconomicallyefficientoutcome?
a.Theradiostationputsupashield,whichitpaysfor.
b.Theradiostationputsupashield,whichthedentistpaysfor.
c.Neithertheradiostationnorthedentistpurchaseadditionalequipment.
d.Thedentistgetsanewdrill;itdoesnotmatterwhopaysforit.
35.Abeownsadog?thedog’sbarkingannoysAbe’sneighbor,Jenny.Supposethatthebenefitofowningthedogisworth$200toAbeandthatJennybearsacostof$400fromthebarking.AssumingAbehasthelegalrighttokeepthedog,apossibleprivatesolutiontothisproblemisthat
a.JennypaysAbe$150togivethedogtohisparentswholiveonanisolatedfarm.
b.AbepaysJenny$350forherinconvenience.
c.JennypaysAbe$300togivethedogtohisparentswholiveonanisolatedfarm.
d.Thereisnoprivatetransactionthatwouldimprovethissituation.
36.WallyownsadogwhosebarkingannoysWally’sneighbor,Corrine.Supposethatthebenefitofowningthedogisworth$700toWallyandthatCorrinebearsacostof$500fromthebarking.AssumingWallyhasthelegalrighttokeepthedog,apossibleprivatesolutiontothisproblemisthat
a.WallypaysCorrine$600forherinconvenience.
b.CorrinepaysWally$400togivethedogtohisparentswholiveonanisolatedfarm.
c.CorrinepaysWally$550togivethedogtohisparentswholiveonanisolatedfarm.
d.Thecurrentsituationisefficient.
37.DickownsadogwhosebarkingannoysDick’sneighborJane.Dickreceivespersonalbenefitfromowningthedog,andJanebearsacostofDick’sownershipofthedog.AssumingJanehasthelegalrighttopeaceandquiet,whichofthefollowingstatementsiscorrect?
a.IfDick’sbenefitexceedsJane’scost,governmentinterventionisnecessary.
b.DickwillpaytokeephisdogifhisbenefitexceedsJane’scost.
c.IfJane’scostexceedsDick’sbenefit,DickwillpayJanetokeephisdog.
d.IfJanehasthelegalrighttopeaceandquiet,nofurthertransactionswillbemutuallybeneficial.
38.Karen’scatcausesDannytosneeze.Karenvalueshercat’scompanionshipat$300peryear.ThecosttoDannyoftissuesandherallergymedicationis$350peryear.BasedontheCoasetheorem,
a.KarenshouldpayDanny$400sothatshemaykeephercat.
b.KarenshouldpayDanny$350fortissuesandallergymedication.
c.DannyshouldpayKaren$325togiveawayhercat.
d.Dannyshouldmove.
39.AccordingtotheCoasetheorem,inthepresenceofexternalities
a.privatepartiescanbargaintoreachanefficientoutcome.
b.governmentassistanceisnecessarytoreachanefficientoutcome.
c.theassignmentoflegalrightscanpreventexternalities.
d.theinitialdistributionofpropertyrightswilldeterminetheefficientoutcome.
40.Assumethatyourroommateisverymessy.Supposeshegetsa$25benefitfrombeingmessybutimposesa$50costonyou.TheCoasetheoremwouldsuggestthatanefficientsolutionwouldbeforyouto
a.payyourroommateatleast$25butnomorethan$50tocleanupafterherself.
b.payyourroommateatleast$51tocleanupafterherself.
c.chargeyourroommateatleast$25tohaveyoucleanupafterher.
d.chargeyourroommateatleast$50butnomorethan$100tokeepyoufromcomplainingaboutthemess.
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