The Tragedy of the Commons Will Be Evident When a Growing

question 106

Multiple Choice

The Tragedy of the Commons will be evident when a growing number of sheep grazing on the town commons leads to a destruction of the grazing resource. To correct for this problem, the town could

• A)allow individual shepherds to choose their own flock sizes.
• B)internalize the externality by subsidizing the production of sheep's wool.
• C)auction off a limited number of sheep-grazing permits.
• D)wait until the market corrects the problem.

---

Definitions:

Perfectly Elastic

Describes a situation where the quantity demanded or supplied responds infinitely or massively at a particular price level, often represented by a horizontal line on a graph.

Excise Tax

An indirect tax charged on the sale of a particular good, usually intended to discourage use of the good or to raise revenue.

Tax Incidence

The degree to which a tax falls on a particular person or group.

Burden of a Tax

The economic impact of a tax on the welfare of buyers or sellers, often depending on the relative elasticities of demand and supply.