Question

One way to solve negative externality problems is

A) to organize a limited boycott of the products.
B) subsidize the externalities.
C) eliminate transactions costs when property rights are not legally established.
D) issue marketable permits to polluting firms.
E) establish and enforce patents and copyrights.

Answer 1

One way to solve negative externality problems is to issue marketable permits to polluting firms. Another method is to establish and enforce patents and copyrights. Organizing a limited boycott of products can also be effective.

Step-by-step explanation:

To solve negative externality problems, one way is to issue marketable permits to polluting firms. Marketable permits are permits that allow a firm to emit a certain amount of pollution, and if a firm has more permits than pollution, they can sell the remaining permits to other firms. This approach creates an incentive for firms to reduce their pollution levels and encourages a more efficient allocation of pollution resources.

Another method to solve negative externality problems is to establish and enforce patents and copyrights. By granting exclusive rights to inventors and creators, it encourages innovation and ensures that the benefits of their inventions or creations are not diluted by external parties.

Furthermore, organizing a limited boycott of products can also be an effective way to address negative externality problems. By collectively refusing to purchase products that contribute to negative externalities, consumers can send a strong message to firms and potentially prompt them to change their practices.