Question 1
________ is(are) an example of selling externality rights.
◦ Auctioning the right to buy a car each year
◦ Direct regulation of externalities
◦ Having the damaged party avoid the damage
◦ Government imposed taxes and subsidies
Question 2
Refer to the information provided in Figure 16.4 below to answer the question(s) that follow.
Los Angeles International Airport (LAX) is located next to Playa Del Rey. The noise from air traffic negatively affects individuals living in Playa Del Rey, however, this cost is not considered by airlines or air travelers. The airlines feel they have a right to use the airspace while the individuals living in Playa Del Rey feel they have the right to quiet. The following diagram depicts the marginal costs and marginal benefits associated with air travel.
Refer to Figure 16.4. Suppose the government assigns property rights to the airlines. No negotiations occur between the parties. The resulting level of air travel is ________.
◦ 0 units
◦ 100 units
◦ 120 units
◦ Indeterminate from the given information.
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