A Familiar Example of a Negative Externality Is Traffic Congestion

question 177

Multiple Choice

A familiar example of a negative externality is traffic congestion. In principle, it should be possible to internalize this externality by permitting drivers to negotiate rights to drive during particular times. The most likely reason that this does NOT happen is that:

• A) most individuals are unfamiliar with the Coase theorem.
• B) the transaction costs associated with identifying and establishing communication among the many interested parties would be prohibitive.
• C) agreements arising from such negotiations could not be enforced, since the Constitution guarantees all individuals freedom of access to all public roads.
• D) lawyers would find a way to prohibit such negotiations unless they were actively involved, and this would make transaction costs prohibitive.

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Definitions:

Message Delivery

The process and method by which a message is conveyed from the sender to the recipient.

Nonverbal Signal

A form of communication without words, such as gestures, facial expressions, body posture, or eye contact, conveying messages or emotions.

Style And Tone

Refers to the way in which a writer or speaker communicates, including the choice of words, sentence structure, and the overall feeling or attitude conveyed.

Leaner Media

Leaner media denotes communication channels that convey messages more succinctly and with less contextual information compared to richer media forms.