According to the Coase Theorem, Externality Problems

question 40

Multiple Choice

According to the Coase theorem, externality problems

• A)do not exist in reality, because all costs and benefits are internal to firms.
• B)can be solved through private negotiations without the need for government intervention.
• C)must only be resolved by government action, through either taxes or subsidies.
• D)can never be resolved adequately, because one party always gains while the other loses.

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Definitions:

Painful Injury

Physical harm or damage to a person's body that results in significant pain or discomfort.

Highly Corrosive

Describes substances that can cause severe damage to materials, tissues, or surfaces through chemical action.

Negligent

Failing to exercise the care that a reasonably prudent person would exercise in similar circumstances.

Tort Liability

Legal responsibility arising from civil wrongs or injuries caused to a person or property, not based on contracts.