Suppose a Large Tree on Adam's Property Blocks Eve's View

question 299

Multiple Choice

Suppose a large tree on Adam's property blocks Eve's view of the ocean. Adam accepts Eve's offer of $15,000 to cut down the tree. This is an example of

• A) internalizing externalities via voluntary agreements.
• B) a result of logrolling.
• C) a consequence of a positive externality.
• D) a consequence of private costs exceeding social costs.

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Definitions:

Interest Rate

The cost of borrowing money or the return for lending money, usually expressed as an annual percentage of the principal.

Effective Usury Laws

Regulations that set maximum interest rates on loans to protect consumers from excessively high costs.

Loanable Funds

The money available for borrowing in the financial markets, often coming from savings and influenced by interest rates.

Real Rate of Interest

The interest rate adjusted for inflation, reflecting the true cost of borrowing money and the real yield for savers.