9. Private solutions to correct for externalities Consider the following scenari

Question

9. 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? O Integration of different types of businesses through merger or acquisition O 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 an excessive amount of time or money must be spent for parties to reach an agreement. This describes the problem of

Explanation / Answer

In the given case local office of a non-profit organisations collects enough donations to stop the firm’s pollutions. These charities are private solution to the externality of pollution.

As private solution to externality do not work, it means externalities is greater than solutions that is greater than the amount invested to control the pollutions. And this describe the problem of a breakdown in bargaining. Breakdown in bargaining means how much investment need to control level of pollution efficiently.

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