Private Parties May Choose Not to Solve an Externality Problem

question 166

True/False

Private parties may choose not to solve an externality problem if the transaction costs are large enough.

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Definitions:

Proportionate Share

An ownership interest reflecting a proportional part of the total shares, often related to profits, losses, or voting power.

Entitlement

The right to benefit from assets or services, such as dividends for shareholders or leave benefits for employees.

Jointly Controlled Entity

An entity that is operated and controlled through a contractual arrangement between two or more parties who have joint control.

AASB 11

An accounting standard issued by the Australian Accounting Standards Board that outlines the reporting requirements for parties involved in joint arrangements.