Question

select the appropriate term to complete the sentences. a. according to the coase theorem, private parties can negotiate to an efficient solution in the presence of externalities if the is (are) relatively low. b. suppose jeremy, francis, and andrew are part of mu epsilon nu, a college fraternity known for its very loud, rambunctious weekend parties. the parties annoy many of the residents in nearby apartment complexes due to the loud music and blaring neon lights. this is an example of . indicate whether each possible solution is a private or non-private approach to the problem caused by the loud fraternity. c. the local city government sends the police to break up the parties. d. the fraternity pays the local community to compensate for the noise pollution. e. the residents of the apartment complexes pay mu epsilon nu not to have loud parties.

Answer 1

In Coase Theorem applications, efficient solutions to externalities rely on low transaction costs. The negative externality of a college fraternity's parties is managed through both private (compensation) and non-private (government intervention) approaches, illustrating how markets can fail to self-regulate in the presence of such externalities.

Step-by-step explanation:

a. According to the Coase Theorem, private parties can negotiate to an efficient solution in the presence of externalities if the transaction costs are relatively low.

b. The situation with Jeremy, Francis, and Andrew's frat parties causing disturbance is an example of a negative externality.

• c. The local city government sends the police to break up the parties. - Non-private approach
• d. The fraternity pays the local community to compensate for the noise pollution. - Private approach
• e. The residents of the apartment complexes pay Mu Epsilon Nu not to have loud parties. - Private approach

A market failure occurs in situations where the private market fails to achieve an efficient output due to the presence of externalities, such as the case with the fraternity's loud parties.