For Voluntary Action to Correct an Externality

question 293

Multiple Choice

For voluntary action to correct an externality

• A) transaction costs have to be high.
• B) transaction costs have to be low.
• C) transaction costs have to be split evenly between all of the parties involved.
• D) transaction costs are irrelevant.

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Definitions:

Unforeseen Circumstances

Situations or events that could not have been predicted or expected, often leading to disruptions in agreements or plans.

Preexisting Duty Rule

A legal principle stating that an existing contractual obligation cannot serve as consideration for a new contract.

Bilateral Contract

A bilateral contract is a mutually binding agreement in which each party makes a promise to the other, such as a promise to perform a service in exchange for payment.

Illusory Promise

Describes a statement or agreement that appears to be a promise but is too vague or has terms that allow the promisor to avoid any real obligation.