Asked by Trista Keller on Jul 07, 2024
Verified
Your favorite holiday is Halloween and each year you decorate your yard with pumpkins, skeletons, and tombstones, and you install a noise machine which blasts haunting sounds 24 hours a day. It is such a spectacle that hundreds of people drive by your house each day to gawk at the display. The noise and traffic disturb your neighbors who sue you, and you are required to take down your display permanently. This is an example of
A) the Coase theorem.
B) a liability rule.
C) an injunction.
D) the free-rider problem.
Liability Rule
A legal principle that allows for compensation when someone's action causes harm or loss to another, even without an agreement between the parties.
Injunction
A legal order by a court requiring a person or entity to do or cease doing a specific action.
Coase Theorem
An economic theory that suggests that private parties can solve the problem of externalities among themselves, regardless of the initial distribution of rights, as long as property rights are well-defined and transaction costs are low.
- Examine the impact that property rights, legal mechanisms (including injunctions and liability laws), and collective bargaining have on mitigating externalities.
Verified Answer
LR
lizbeth rochaJul 12, 2024
Final Answer :
C
Explanation :
This scenario is an example of an injunction, which is a court order requiring a party to do or cease doing a specific action. In this case, the court orders the removal of the Halloween display due to the disturbance it causes to the neighbors.
Learning Objectives
- Examine the impact that property rights, legal mechanisms (including injunctions and liability laws), and collective bargaining have on mitigating externalities.