The Coase Theorem Will Apply Only When

question 69

Multiple Choice

The Coase theorem will apply only when

• A)an individual who is not affected by the externality can negotiate a settlement between the parties imposing the externality and the parties that are harmed by the externality.
• B)transactions cost are low.
• C)the market is perfectly competitive.
• D)the courts can be used to determine the amount of compensation that must be made to the damaged party.
• E)the amount of compensation that must be made to the damaged party is small.

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Definitions:

Financial Statement Income

The income reported by a company on its financial statements, which includes revenues, expenses, gains, and losses.

Domestic Corporation

A corporation that is incorporated under the laws of the country in which it is doing business.

Taxable Income

The portion of income subject to taxes after adjustments, deductions, and exemptions are applied to gross income.

FMV

The fair market value, or the price that property would sell for on the open market between a willing buyer and a willing seller.