Scenario: the Following Figure Shows the Private Cost and Social

question 37

Multiple Choice

Scenario: The following figure shows the private cost and social cost of producing Good X. Firm A is the producer of Good X. The production plant and Bob's house are located next to a river. However, the plant is upstream, and Bob's house is downstream. Since production pollutes the river, Bob suffers from a negative externality.

-Refer to the scenario above.If the property rights to the river belong to the firm,what is the maximum transfer between the two party necessary to make the firm produce the socially optimal quantity?

• A) A payment of ((a c) f) ((b d) e) from the firm to Bob
• B) A payment of ((a c) f) ((b d) e) from Bob to the firm
• C) A payment of (a c) (f e)/2 from the firm to Bob
• D) A payment of (b d) (f e)/2 from Bob to the firm

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Definitions:

Predictability

The ability to accurately anticipate future events or behaviors based on patterns, trends, or previous data.

Authoritarian Personality

A psychological profile of individuals who exhibit extreme obedience and submission to authority, alongside a desire to control and dominate others.

Status Differences

Variations in social, professional, or other standing among individuals or groups, often influencing dynamics and interactions.

Control-Oriented

An approach or system focused on regulating processes, activities, or people to ensure conformity and efficiency.