Suppose that a chicken farm uses a nearby stream to dispose of the wastes releas

Question

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 due to the minerals in the waste matter. The local office of a nonprofit environmental organization collects enough donations to stop the farm's pollution. Which of the following types of private solutions to the externality of pollution has occurred in this case? O Integration of different types of businesses through merger or acquisition O Contracts Charities O Moral codes and social sanctions It's important to note that sometimes private solutions to externalities do not work. For example, this occurs when communication barriers or social customs are important enough relative to the potential gains involved that MacBook Air

Explanation / Answer

In this case charitable types of private solution to the externality of pollution have occurred. This is because the local office of NGO has collected enough donations to stop the farm’s pollution which they were generating by releasing waste in a nearby stream.

Sometimes private solution to the externalities does not work for example this occurs when communication barriers or social customs are important enough relative enough to the potential gains involved that over rides the moral codes and sanctions which otherwise should have been in place.

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