Question

Consider the following scenario: Suppose that a cafe enjoys a large increase in customers whenever the jazz club next door features a band playing appealing music, because it can be easily heard from the cafe. The jazz club owner decides to purchase the cafe so that he can internalize this positive externality. Which of the following types of private solutions to the externality of appealing music has occurred in this case? Integration of different types of businesses through merger or acquisition Charities Contracts Moral codes and social sanctions It's important to note that sometimes private solutions to externalities do not work. For example, this occurs when the number of parties involved is so large that it makes .

Answer 1

Integration of different types of businesses through merger or acquisition

negotiations among all of the parties too costly

Step-by-step explanation:

Here is the complete second question : It's important to note that sometimes private solutions to externalities do not work. For example, this occurs when the number of parties involved is so large that it makes (the market failure from the externality unimportant, coordinating negotiations among all of the parties too costly, government action the only viable solution).

Positive externality occurs when the benefits of economic activities to third parties exceeds the costs.

Government encourages activities that generates positive externalities by granting subsidies

The activities of the jazz club generates positive externality to the cafe.

How to internalise positive externality includes :

1. Integration of different types of businesses through merger acquisition : this is the step taken by the cafe by purchasing the jazz club
2. Charities
3. Contracts