The Tragedy of the Commons Will Be Evident When a Growing

question 253

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 chose 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.

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Definitions:

Labor Productivity

A measure of economic performance that calculates the amount of goods and services produced per unit of labor.

Nominal Wages

Refers to the actual money paid to workers, not adjusted for inflation.

Price Level

The general average of the prices of goods and services in an economy at a given time.

Real Wages

Wages that have been adjusted for inflation, reflecting the actual purchasing power of the income received by workers.