Coase Theorem Case Solution

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This is uncertain because you don’t know if the road is congested. or not. If the road were congested for example: during rush hour it would be nonexcludable because adding another vehicle can get in the way with the drivers already using the road. The consumption would be rival no one can consume.

d) Larger communities tend to consume greater quantities of a nonrival good than smaller communities. False. Even though there are more users in a larger community, all users have access once the good is provided, but not necessarily the chosen amount. Therefore, there is no reason larger communities tend to consume greater quantities of a nonrival good than smaller communities.

4. 2008, the US government spent about $1.6 million on the search for extraterrestrial …show more content…

Caithness Energy. a big company from New York, is building wind farms in eastern Oregon. Prior to construction the company offers residents $5,000 each to sign a waiver saying they will not complain about excessive noise from the turning wind turbines [Yardley, 2010]. Analyze this offer in terms of the Coase Theorem. According to the terms of the Coase Theorem implies that once property rights are established, government intervention is not required to deal with externalities. In this case, if the Caithness Energy can come to a bargaining agreement with all the residents that’s affected by the noise pollutant (wind turbine) by signing a $5,000 waiver, then there will be no need for government intervention. However, if some residents refuse to sign the waiver, this will impose a conflict and the government will need to intervene. Since, the Caithness Energy offered the residents involved $5,000 not to complain; apparently, the value of operating the wind turbines was in fact greater to the company than the value of quiet was to the residents, and it was probably easier for the company to proactively offer compensation to the households than it would have been to get the courts

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