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Homework {Ch l0) 9. Private solutions to correct for externalities Consider the following scenario: Suppose that a brewery enjoys a large increase in customers whenever
Homework {Ch l0) 9. Private solutions to correct for externalities Consider the following scenario: Suppose that a brewery enjoys a large increase in customers whenever the blues bar next door features a band playing live music, because it can be easily heard from the brewery. The blues bar owner decides to purchase the brewery so that he can internalize this positive externallty. Which of the following private solutions resolving the externality of live music took place in this scenario? 0 Charities 0 Contracts O Moral codes and social sanctions 0 Integration of different types of businesses through merger or acquisition Keep in mind that sometimes private solutions to externalities are not achieved. For instance, this could occur when communications barriers or social customs are important enough relative to the potential gains involved that V . Continue without saving
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