1. The distributional consequences of the delineation of roperty rights are elim
ID: 1120894 • Letter: 1
Question
1. The distributional consequences of the delineation of roperty rights are eliminated when preferences are quasi- inear (or in the absence of income effects). True or false? 2. In a market for a dirty good, the inverse demand function is given by p = 100-y, and the private marginal cost of production is given by MC = 10 + The pollution enerated by this industry creates external damages given y the consfant marginal external cost of 2 dollars. (1) Find the competitive equilibrium without regulation (Hint MC) (2) Find the socially optimal output(Hint: p = MC + 2) (3) Determine the Pigovian tax that would result in a competitive market producing the socially efficient output.Explanation / Answer
Answer 1:- The distributional consequences of the delineation of property rights are eliminated when preferences are quasi-linear.
Correct Answer:- False
Reason:- If preferences are quasilinear, then the delineation of property rights has no distributional consequences
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