Question

Consider the following scenario:Suppose that Sharon has just finished smoking a cigarette and is thinking about throwing the cigarette butt onto her neighbor Paolo's driveway. Although no police officers are around, she instead decides to carry it to a trash can because she doesn't want to embarrass herself by letting people see her littering.Which of the following types of private solutions to the externality of littering has occurred in this case?(A) Integration of different types of businesses through merger or acquisition(B) Contracts(C) Charities(D) Moral codes and social sanctions

Answer 1

Answer:

Moral codes and social sanctions

Explanation:

Externality is when the actions of a producer or consumer have an effect on third parties not involved in production or consumption.

Externality can be positive or negative.

Postive externality is when the benefits of economic activities to third parties exceeds the costs.

Negative externality is when the costs of economic activities to third parties exceeds the benefits.

Smoking and littering the environment with cigeratte butts is an example of an activity that generates negative externality.

Sharon's morals and sense of judgement cautioned her against littering with her cigarette butts because she knows such activity is frowned against by the society. So, in this case she is guided by her moral codes.

This is one of the solutions to externality.

Other solutions include:

Taxation

Integration of different types of businesses through merger or acquisition

Contracts

Charities

I hope my answer helps you