Ten friends who love to ski decide to pool their financial resources and equally share the cost of a one-week time-share condominium in Alta, Utah. If lift lines at the ski resort become more congested when these ten additional people start to ski, then which is not true?

a. Use of the ski resort by all of these ten new skiers will yield a negative externality.
b. The ski resort can reduce the congestion externality by raising lift ticket prices.
c. An increase in lift ticket prices could be viewed as a Pigovian tax on the externality of congestion.
d. Everyone would have been better off to stay at home.

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ewomazinoade ewomazinoade · Answer 1 · 2020-04-18T03:11:52+02:00

Answer:

d. Everyone would have been better off to stay at home.

Explanation:

Negative Externality is when the benefits of economic activities to third parties is less than the costs.

If all 10 friends use the ski, the cost to others would be greater than its benefit.

If price is raised, the demand for the ski would fall on accordance to the law of demand.

Pigovian tax is tax levied on negative externality with the goal of eliminating it.

I hope my answer helps you