Parties Affected by Externalities Have an Incentive to Negotiate as Long

question 55

Multiple Choice

Parties affected by externalities have an incentive to negotiate as long as

• A) the cost of the negotiation is less than the surplus that could be gained.
• B) the cost of the negotiation is greater than the surplus that could be gained.
• C) the cost of the negotiation is equal to the surplus that could be gained.
• D) there is no surplus.
• E) the surplus is positive regardless of the cost.

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Definitions:

UCC 2-301

A provision under the Uniform Commercial Code (UCC) that emphasizes the importance of good faith in the performance or enforcement of contracts covered by the UCC.

Obligor

The party in a contractual agreement who is bound to provide a benefit or payment to another.

Assignment

A contracting party’s transfer of his or her rights to a contract to a third party.

Personal in Nature

Refers to anything related to or affecting a person individually, rather than businesses or entities.