Scenario: the Following Figure Shows the Private Cost and Social

question 162

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 minimum 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:

Friendships

Close and affectionate relationships between two or more people, characterized by mutual support, understanding, and shared interests.

Classical Conditioning

A learning process that occurs through associations between an environmental stimulus and a naturally occurring stimulus, leading to a learned response.

Reward Model

A theoretical framework suggesting that individuals are motivated by the anticipation of rewarding outcomes.

Liking

The feeling of being attracted or having a positive sentiment towards something or someone.