Question

Q9. The resources invested in establishing and maintaining property rights are: A. externalities. B. transactions costs. C. extremely high. D. very small. E. profits.

Q10. The existence of an externality is: a. impossible in an economy. B. an oxymoron. C. an indication of perfectly defined property rights. d. a sufficient condition for government intervention. E. a necessary but not sufficient condition for government intervention.

Q11. An externality occurs because: a. the courts are biased. b. people do not understand the theory. c. there are no property rights. d. property rights are clearly defined. e. there are bullies in the economy.

Answer 1

9. Option D.

• The property rights are those attributes that determine the amount of resources goods owned by certain individuals, firms or businesses.
• The resources invested in establishing and maintaining property rights are very small.
• This affects the fair allocation of resources and goods within the society.

10. Option D.

• The existence of an externality is a sufficient condition for government intervention.
• Externalities can cause inefficiencies and market failures.
• Hence, the government intervenes into the economy to control such externalities.

11. Option C.

• An externality occurs because there are no property rights.
• When the property rights are not clearly defined and absent, market's fail and the negotiations become costly.