The Coase Theorem States That

question 17

Multiple Choice

The Coase theorem states that

• A)transaction costs consist of marginal private costs and marginal social costs and are higher when exchange is subject to increasing marginal costs.
• B)transaction costs are the difference between marginal social costs and marginal private costs and are higher when exchange is subject to decreasing marginal costs.
• C)when transaction costs are significant, the resource-allocative outcome will be the same regardless of who is assigned the property rights.
• D)when transaction costs are insignificant, the resource-allocative outcome will be the same regardless of who is assigned the property rights.
• E)b and c

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Definitions:

Cognitive Dissonance

A state of psychological discomfort caused by holding two conflicting beliefs, values, or attitudes.

Confirmation Bias

The tendency to search for, interpret, favor, and recall information in a way that confirms one's preexisting beliefs or hypotheses, while giving disproportionately less consideration to alternative possibilities.

Fundamental Attribution Error

The tendency to overemphasize personal traits and minimize situational factors as causes of other people's behavior.

Internal Attributions

The process of assigning the cause of behavior to internal characteristics, traits, or abilities of the individual.