Asked by Diadima Young on May 06, 2024
Verified
Under Scenario 18.1, suppose the body of water lies on an international boundary, and the fishermen speak a different language than the factory managers. The efficient outcome cannot be achieved if the cost of hiring translators for both parties:
A) is less than $4,000.
B) equals $5,000.
C) is greater than $6,000.
D) none of the above
Efficient Outcome
A situation in which resources are allocated in the most optimal way, often leading to the maximum possible benefit.
International Boundary
The officially recognized line that separates one country from another, defining the geographical limits of sovereign jurisdictions.
Translators
Individuals or software that convert text or speech from one language to another, enabling communication across different languages.
- Acquire knowledge of the Coase theorem's principles and their application in the negotiation of costs and benefits associated with pollution.
- Recognize situations where the application of the Coase theorem may be ineffective or inapplicable due to elevated transaction costs or ambiguously established property rights.
Verified Answer
PH
Phoenix HinesMay 09, 2024
Final Answer :
C
Explanation :
The efficient outcome (highest combined profit) is option B, with a total profit of $16,000 ($6,000 for the factory and $10,000 for the fishermen). If the cost of hiring translators is greater than $6,000, the additional cost would make negotiations too expensive to achieve this outcome, as the net benefit would be reduced below the next best alternative (option A with a combined profit of $12,000).
Learning Objectives
- Acquire knowledge of the Coase theorem's principles and their application in the negotiation of costs and benefits associated with pollution.
- Recognize situations where the application of the Coase theorem may be ineffective or inapplicable due to elevated transaction costs or ambiguously established property rights.