The Idea That Even in the Presence of Externalities an Economy

question 131

Multiple Choice

The idea that even in the presence of externalities an economy can reach an efficient solution as long as transaction costs of making a deal are low and property rights are well-defined is known as:

• A)a Pigouvian tax.
• B)a network externality.
• C)a technology spillover.
• D)the Coase theorem.

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Definitions:

Break-Even Point

The point at which total costs and total revenue are equal, meaning no net loss or gain is incurred; a critical measure of financial viability for a product or business.

Variable Cost

Costs that change in proportion to the level of production or sales volume, such as raw materials and direct labor.

Variable Cost

Costs that change in proportion to the level of activity or volume of production, such as materials and labor.

Fixed Cost

Expenses that do not change in relation to production volume, such as rent, salaries, and insurance premiums.