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?

A. Contacts, moral codes and social sanctions
B. Integration of different types of businesses through merger or acquisition

Answer 1

Answer: A. Contacts, moral codes and social sanctions

Explanation: The "company" that provides the solution is a non-profit environmental organization that relies on donations. Option B is not an option, because there is no merging or integration of companies in this context.