A Familiar Example of a Negative Externality Is Loud Music

question 97

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 rights to play music during particular times. 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:

Defensive Attribution

A psychological process by which individuals assign causes to behaviors or outcomes in a way that defends their self-esteem.

Stereotype

Widely held but fixed and oversimplified images or ideas of a particular type of person or thing, which can often lead to prejudiced attitudes or behaviors.

Person Perception

The process of forming impressions and making judgments about the traits and characteristics of others.

Attribution

The process by which individuals explain the causes of behavior and events, attributing them to internal dispositions or external situations.