Suppose a Negative Externality Exists in a Market

question 169

Multiple Choice

Suppose a negative externality exists in a market.If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem,

• A)an efficient solution can be reached only if property rights are assigned to the victims of the pollution.
• B)an efficient solution can be reached only if property rights are assigned to the polluters.
• C)an efficient solution can be reached regardless of the initial assignment of property rights.
• D)government intervention is critical to reach an efficient solution.

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Definitions:

Form 1040

The customary Internal Revenue Service (IRS) document utilized by individuals for the purpose of filing their annual earnings tax returns.

Tax Rate Structure

The dividing of taxable income into sections (brackets), each of which is taxed at a different rate.

Progressive

A term used to describe a tax system where the tax rate increases as the taxable income increases.

Proportional

A concept where elements are in a constant relationship in terms of size, amount, or number relative to a whole.