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Chapter 5: Q 7 (page 120)

Consider a nation with a government that does not provide people with property rights for a number of items and that fails to enforce the property rights it does not assign for the remaining items. Would externality be more or less in this nation than in a country such as the United States? Explain.

Short Answer

Expert verified

The externality will be more for the nation as compared to the United States.

Step by step solution

01

Step 1. Define Externality.

An externality is a consequence of an economic activity that affects the third party. For example, pollution is an externality.

02

Step 2. Externality more or less.

The externality will be more for the nation as compared to the United States.

People will be opening shops wherever they can and will be illegally using items that do not have any property rights. Which will lead to a greater setback for the citizens of the nation.

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