Question

Private solutions to correct for externalities consider the following scenario:________.

Suppose that a chicken farm uses a nearby stream to dispose of the wastes released by its chickens. These wastes flow downstream into a lake that has become thick with algae and polluted due to the minerals in the waste matter. The local office of a nonprofit environmental organization collects enough donations to stop the farm's pollution.
Which of the following types of private solutions to the externality of pollution has occurred in this case?
A. Integration of different types of businesses
B. Contracts
C. Moral codes and social sanctions
D. Charities
It's important to note that sometimes private solutions to externalities do not work. For example, this occurs when communications barriers or social customs are important enough relative to the potential gains involved that __________

Answer 1

Answer: Charities; coordinating negotiations among all of the parties too costly

Step-by-step explanation:

From the question, we are told that that a chicken farm uses a nearby stream to dispose of the wastes that is released by its chickens and that the wastes flow downstream into a lake that has become polluted due to the waste matter. The local office of a nonprofit environmental organization then collects enough donations in order to stop the farm's pollution.

The type types of private solutions to the pollution externality which has occured is charity. This is because it is a voluntary activity. The money collected is meant for a specific objective which is to tackle the issue of pollution.

It is also vital to note that sometimes the private solutions to externalities might not work. For example, this occurs when communications barriers or social customs are important enough relative to the potential gains involved that coordinating negotiations among all of the parties too costly.