The Coase Theorem States That,in the Presence of Externalities,a Market

question 136

Multiple Choice

The Coase theorem states that,in the presence of externalities,a market economy will:

• A)always reach an efficient solution.
• B)never reach an efficient solution.
• C)reach an efficient solution if transaction costs are sufficiently low and property rights are well-defined.
• D)reach an efficient solution only in the case of government regulation.

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Definitions:

Market Neutral

An investment strategy that seeks to avoid some forms of market risk by taking offsetting positions in different securities, aiming for a net market exposure of zero.

Government Regulation

The act of controlling business behavior through a set of rules or laws set forth by the government to achieve outcomes that might not be achieved through free markets.

Incentive Fee

An incentive fee is a fee charged by a fund manager based on the fund's performance, encouraging the manager to achieve superior returns.

Benchmark

A standard or point of reference against which the performance of a security, mutual fund, or investment manager can be measured.