The Coase Theorem Suggests That Private Solutions to an Externality

question 343

Multiple Choice

The Coase theorem suggests that private solutions to an externality problem

• A)are effective under all conditions.
• B)will usually allocate resources efficiently if private parties can bargain without cost.
• C)are only efficient when there are negative externalities.
• D)may not be possible because of the distribution of property rights.

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Definitions:

Primary Security Offerings

The process by which new securities are issued and sold to investors, allowing companies or governments to raise capital.

Institutional Investors

Entities such as banks, insurance companies, and pension funds that invest large sums of money into financial markets.

Designated Order Turnaround

A system used by stock exchanges to expedite the processing of stock orders by converting paper order tickets into electronic form.

NYSE Hybrid Market

A blend of electronic trading and traditional floor trading practices on the New York Stock Exchange, aiming to maximize the advantages of both.