Consider a Local Factory That Pollutes a Nearby Stream

question 107

Multiple Choice

Consider a local factory that pollutes a nearby stream.Local fishers may be unable to negotiate a deal with the local factory to eliminate the negative externality because:

• A)the fishers' cost will never exceed the factory's benefit from polluting the stream
• B)the local law gives the factory the right to pollute
• C)the cost of coordinating the fishers into one bargaining body is too large
• D)some of the local fishers work at the factory

---

Definitions:

Reserve Requirements

The minimum amount of reserves that a bank must hold as mandated by a central bank, affecting the bank's ability to lend.

Glass-Steagall Act

A 1933 law creating a regulatory firewall between commercial and investment banking sectors to prevent financial crises.

Investment Banking

A segment of banking that specializes in providing various financial-related and advisory services to individuals, corporations, and governments in relation to underwriting, capital raising, merger, and acquisition, and other transactions.

Universal Banks

Financial institutions that offer a wide variety of banking services, including both commercial and investment services.