The Coase Theorem Implies That Victims of Pollution Should Be

question 41

Multiple Choice

The Coase Theorem implies that victims of pollution should be able to pay polluters not to pollute if the victims value a reduction in pollution more than the polluters value the production of the pollution. Which of the following does not explain why this type of payment does not work in "real life"?

• A)If there are many victims, the costs to them of organizing may be quite high.
• B)If there are many firms in the industry, it may be difficult for the victims to negotiate with all of the firms.
• C)The victims may have trouble quantifying the value to them of reducing the pollution.
• D)Bargaining costs are likely to be small in this case, so the theorem does not apply.

---

Definitions:

Brand Extension

Brand extension involves using an existing brand name on a new product category, levering brand equity to enter new markets or sectors.

Sugar-Free Drink

A beverage that does not contain sugar, often sweetened with artificial sweeteners or natural alternatives.

Product Line Extension

The addition of new products to an existing product line to attract new customers or to capitalize on existing brand loyalty within the market.

Product Life Cycle

The stages a product goes through from development and introduction to the market, through growth and maturity, and eventually decline.