Use the idea of external costs to explain why some cities have ...

[krzymel]

Use the idea of external costs to explain why some cities have laws against late-night rock concerts.
 
  What will be an ideal response?

Question 2

Using the Coase theorem, why might a firm that currently pollutes a river no one owns pollute the river less if it owned the river?
 
  What will be an ideal response?

[micaelaswann]

Answer to Question 1

While many people might like to see a midnight show featuring AC/DC or Creed, many others argue that a rock concert blaring away early in the morning imposes external costs on many nearby residents who do not want to be disturbed late at night. Therefore regulations on the time that music can be emitted are common. To the extent that the regulations are motivated by the externality, such regulations increase efficiency.

Answer to Question 2

The firm would pollute less if it owned the river because its neighbors could compensate the firm if it limits its pollution. If the firm pollutes beyond this limit, it would lose that payment from neighbors and, thereby, incur the cost of polluting.