Question

The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commons leads to a destruction of the grazing resource. To correct for this problem, the town could a. auction off a limited number of sheep-grazing permits. b. wait until the market corrects the problem. c. internalize the externality by subsidizing the production of sheep's wool. d. allow individual shepherds to choose their own flock sizes.

Answer 1

A) auction off a limited number of sheep-grazing permits.

Step-by-step explanation:

The phrase tragedy of the commons is used to exemplify a situation where individuals act upon their self interest and contrary to the common good.

In this case the sheep herders are acting selfishly because they are destroying the communities' ecological resources (grazing resources are pasture). In order to prevent this, the town government should auction a limited number of sheep grazing permits. That way the number of sheep can be kept under control and at a reasonable amount that doesn't destroy the town's ecological resources.