In the case before her, Judge Thomas has heard claims by orange growers that to order a stop to orange growing in order to control a pest that thrives on oranges plants but does not harm them would result in a loss of profits of $3 million a year. The pest however causes $2 million of damages to trees owned by pulp manufacturers. The orange growers have not mentioned that they could control the pest at a cost of $1 million per year. High transactions costs have prevented the parties from reaching a private agreement. If she gives the property right to the
a. orange growers, they will then voluntarily control the pest.
b. orange growers, they will not control the pest.
c. pulp manufacturers, they will pay the orange growers to control the pest.
d. pulp manufacturers, the orange growers would offer a side payment of at least $2 million to be able to grow oranges.
b. orange growers, they will not control the pest.
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Which of the following statements best defines private costs?
A) They are internal in the sense that the buyer or seller must explicitly take them into account. B) They are costs borne by people other than those who commit the action. C) They are synonymous with social costs. D) They represent explicit costs incurred by producers in the private sector.
Suppose the government never borrows, so that it always finances its expenditures with taxes. Suppose further that government spending does not depend on income. In this case:
A. neither government spending nor taxes are automatic stabilizers. B. taxes are an automatic stabilizer but government spending is not. C. government spending is an automatic stabilizer, but taxes are not. D. both government spending and taxes are automatic stabilizers.