Question

You are the County Commissioner of Hazard County. Jeb brings a complaint before you that​ Dwight's hog farm is creating a terrible odor.

Your first instinct is to tell the neighbors to work it out among themselves. The ______ (coase theorem or laffer curve or ricardo conjecture))provides theoretical support for private bargaining as an effective approach to______(externalize the surplus or internalize the exernality or treat all parties fairly with surplus).

According to this theoretical​ principle, ______(government intervention or command and control or private bargaining )will only work as a solution if Jeb _______(does or does not) have a right to clean air.

You are about to recommend that Jeb and Dwight engage in private bargaining to deal with the externality when twenty of​ Dwight's neighbors also complain that they​ don't like the smell.   

Private bargaining is _______(more or less) likely to be successful the more parties involved because of ______(decreased transaction costs or increased transaction costs)

Answer 1

You are the County Commissioner of Hazard County. Jeb brings a complaint before you that​ Dwight's hog farm is creating a terrible odor.

Your first instinct is to tell the neighbors to work it out among themselves. The coase theorem provides theoretical support for private bargaining as an effective approach to internalize the exernality.

According to this theoretical​ principle, private bargaining will only work as a solution if Jeb does have a right to clean air.

You are about to recommend that Jeb and Dwight engage in private bargaining to deal with the externality when twenty of​ Dwight's neighbors also complain that they​ don't like the smell.   

Private bargaining is less likely to be successful the more parties involved because of increased transaction costs.

Explanation: According to Coase Theorem, where there are complete competitive markets with no transactions costs, private bargaining can lead to social optimum.