Refer to the Information Provided in Figure 16

question 162

Multiple Choice

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. Figure 16.4
-Refer to Figure 16.4. Suppose the government assigns property rights to the residents of Playa Del Rey, then the airlines and the residents engage in negotiations. The ________ of air travel is 100 units.

• A) minimum allowable level
• B) resulting efficient level
• C) government-regulated level
• D) maximum allowable level

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Definitions:

Actual Price Level

The Actual Price Level refers to the current general level of prices for goods and services in the economy at a specific point in time.

Actual Price Level

The current average of all prices of goods and services in an economy, indicating the cost of living and the economic environment.

Potential Output

The maximum amount of goods and services an economy can produce when it is fully employing its resources.

Aggregate Demand

The total demand for all goods and services in an economy at various price levels, over a specific time period.