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:

Conclusion

The end or finish of an event, process, or text; in logic, it is the statement that necessarily follows from the premises of an argument.

Categorical Syllogism

A form of deductive reasoning consisting of three propositions: a major premise, a minor premise, and a conclusion, each of which states a relationship between categories.

Propositions

Statements or assertions that express judgments or opinions which can be either true or false.

Categorical Propositions

Statements in logic that assert or deny something about all or some of the members of a category, involving a subject and predicate and following specific forms.