In Which of These Situations Would the Coase Theorem Be

question 93

Multiple Choice

In which of these situations would the Coase theorem be MOST likely to work?

• A) A thousand firms use a lake, there are no other users, all their costs could be reduced somewhat by polluting, but all would have lower water intake costs if the lake were clean.
• B) A group of nine firms use a lake, there are no other users, all their costs could be reduced somewhat by polluting, but all would have lower water intake costs if the lake were clean.
• C) Worldwide deep sea fishing rights need to be negotiated among thousands of fishermen from different countries.
• D) One hundred and fifty nations need to come to an accord about CFC generation to combat ozone depletion.
• E) A group of chemical firms high upstream on the Mississippi River have emissions that affect not only communities downstream along the river, but around the Gulf of Mexico as well.

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Definitions:

Financing Activities

Transactions involving changes in equity and borrowings of the company, reported in the cash flow statement.

Net Cash

The difference between a company's total cash inflows and outflows over a specific period.

Operating Activities

Business actions that are directly related to the production, sale, and delivery of products or services, which are reflected in the company's income and cash flow statements.

Cash Basis

A bookkeeping approach that registers income and expenses at the time cash is exchanged, rather than when they are accrued.