A Familiar Example of a Negative Externality Is Loud Music

question 110

Multiple Choice

A familiar example of a negative externality is loud music on a college campus.In principle, it should be possible to internalize this externality by permitting students to negotiate about rights to play music during particular time periods.The most likely reason that this does not happen is that:

• A)most students are unfamiliar with the Coase theorem.
• B)the transaction costs associated with identifying and establishing communication with students would be high.
• C)agreements arising from such negotiations could not be enforced.
• D)most students don't view loud music as a negative externality.

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Definitions:

Internal

Pertaining to or occurring within an organization or entity.

Restraining Forces

Forces that counteract change in an organization by maintaining the status quo.

Driving Forces

Powerful influences or motivations that propel an individual, group, or organization towards achieving goals or initiating change.

Unfreezing

The initial phase in the change process where existing behaviors, attitudes, or norms are challenged or questioned in preparation for change.