ECONOMICS
PROPERTY RIGHTS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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the wealthy people have to be protected properly.
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most of the resources in a market economy are owned by private individuals.
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the price mechanism is the only way to allocate resources in a market economy.
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exchanges cannot occur if private property rights over goods are not well-defined.
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Detailed explanation-1: -Well defined property rights increase the market value of products and services. Many environmental problems arise because property rights are not clearly-defined or secure, and prices cannot effectively signal the (marginal) costs to the marketplace. These conditions may create a role for government action.
Detailed explanation-2: –With well-defined property rights and competition, market equilibrium is efficient. The equilibrium price will be too low and the equilibrium quantity too high for efficient resource allocation.
Detailed explanation-3: -Property rights give the holder of the right the ability to use a resource, the ability to exclude others from using it, and usually the right to sell or transfer the resource to another person.
Detailed explanation-4: -When property rights are not clearly defined or adequately protected, market failure can occur. That is, no solution that meets the needs of all parties involved can be achieved. Traffic congestion might be an example of an externality without a solution.