Consider the following scenario:
Suppose that a chicken farm uses a nearby stream to dispose of the wastes released by its chickens. These wastes flow downstream into a lake that has become thick with algae and polluted by the minerals in the waste matter. The local office of a nonprofit environmental organization collects enough donations to fund a campaign to stop the farm's pollution.
Which of the following types of private solutions to the externality of pollution has occurred in this case?

a) Contracts
b) Moral codes and social sanctions
c) Charities
d) Integration of different types of businesses through merger or acquisition

It's important to note that sometimes private solutions to externalities do not work. For example, this occurs when the number of parties involved is so large that it makes ___________(government action the only viable solution/ the market failure from the externality unimportant/ coordinating negotiations among all of the parties too costly).

This is because charity is a private solution of externality under which non-profit organization works together to stop the farm pollution from continuous polluting the environment through its waste products coning out of the farm.

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funmilaciousfunmie78 funmilaciousfunmie78 · Answer 2 · 2020-05-12T02:54:43+02:00

Answer:

i) Charities (option A).

ii) Sometimes, private solutions to externalities do not work . For example, this occurs when the number of parties involved is so large that it makes coordinating negotiations among all of the parties too costly.

Explanation:

Based on the scenario described in the question, the private solution to the externality of pollution is 'charities'. This is because the voluntary activity of the non-profit organization to stop the pollution is charities.

Hence, 'charities' is the answer.

Sometimes, private solutions to externalities do not work. For example, this occurs when the number of parties involved is so large that it makes coordinating negotiations among all of the parties too costly.