Question

question 39
the basic cause of deadweight losses from the existence of common resources and externalities is
○ a lack of clearly defined and enforceable property rights.
○ the self-interested rationality of human beings.
○ the absence of government intervention.
○ the use of a market system to deal with scarcity.

question 40
for-profit producers will produce only private goods because
○ all external benefits can be internalized using market prices.
○ markets exist for private goods but not for public goods.
○ the cost of production can be easily determined.
○ buyers will be willing to pay for the goods since the benefits are excludable.

Explanation:

Question 39

To determine the basic cause of deadweight losses from common resources and externalities, we analyze each option:

• Option 1: A lack of clearly defined and enforceable property rights leads to issues with common resources (tragedy of the commons) and externalities (since no one owns the resource or the impact, overuse or unaccounted costs/benefits occur).
• Option 2: Self - interested rationality alone isn't the root cause; it's the lack of property rights that allows self - interest to cause inefficiencies.
• Option 3: Government intervention can address issues, but the absence of it isn't the basic cause. The basic cause is the lack of property rights.
• Option 4: Using a market system for scarcity isn't the cause; markets can work with proper property rights.

To find why for - profit producers make only private goods, we analyze each option:

• Option 1: External benefits are hard to internalize with market prices, so this is incorrect.
• Option 2: Markets can exist for public goods (e.g., some public goods can be provided in a market - like way, but it's not common). The key is excludability.
• Option 3: Cost determination isn't the main reason; the ability to exclude non - payers is.
• Option 4: Private goods are excludable, meaning buyers who don't pay can be excluded from benefits. For - profit producers need buyers to pay, so they produce private goods where benefits are excludable.

Answer:

a lack of clearly defined and enforceable property rights.

Question 40