Author Question: Define the term property rights. Explain why the lack of well-defined and enforceable property ... (Read 199 times)

BrownTown3 · **on:** Jun 29, 2018

Define the term property rights. Explain why the lack of well-defined and enforceable property rights is detrimental to the smooth functioning of a market system.

What will be an ideal response?

Question 2

What kinds of risks can't be insured?

What will be an ideal response?

Liamb2179 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

The term property rights refers to the rights that individuals or firms have to the exclusive use of their resources, within the confines of the law. Well-defined and enforceable property rights provide the incentive for people and firms to invest resources and undertake risks. This encourages the production of a wide range of goods and services. Without property rights and the means to enforce these rights, no person would want to undertake such a risk.

Answer to Question 2

Insurance works because the risks of adverse outcomes are independent, that is, one person suffering a loss does not affect the likelihood that other people will suffer similar losses. If the losses from an event are not independent, so that everyone suffers a loss at the same time, then the risk of loss cannot be insured.