Which one of the following is a reason why extending property rights is an effective policy to reduce market failure caused by negative externalities?
It completely eliminates the free-rider problem associated with pure public goods.
It allows affected parties to claim compensation, forcing polluters to internalise the external costs.
It ensures that merit goods are provided at the socially optimum level without any government subsidy.
It leads to a progressive redistribution of land and assets to lower-income households.
378 exam-style questions on AQA A Level Economics 1.8 The market mechanism, market failure and government intervention in markets, covering 1.8.1 How markets and prices allocate resources, 1.8.2 The meaning of market failure, 1.8.3 Public goods, private goods and quasi-public goods, 1.8.4 Positive and negative externalities in consumption and production, 1.8.5 Merit and demerit goods, 1.8.6 Market imperfections, 1.8.7 Competition policy (A-level only), 1.8.8 Public ownership, privatisation, regulation and deregulation of markets (A-level only), 1.8.9 Government intervention in markets, and 1.8.10 Government failure. Each one has a worked solution and a mark scheme showing where the marks go.