When Parties Who Are Bargaining to Eliminate an Externality "Hold

question 165

Multiple Choice

When parties who are bargaining to eliminate an externality "hold out" for a better deal,

• A)the inefficient outcome persists.
• B)the eventual outcome will maximize total well-being.
• C)transaction costs must be low.
• D)one party will gain more than the other party.

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Definitions:

Demand Determined

A situation where the quantity of a good or service bought is strictly influenced by consumer demand.

MRP

Marginal Revenue Product, which is the additional revenue generated from employing one more unit of a resource.

Productivity

A measure of the efficiency of production, often expressed as the ratio of output to input within a specific period.

Marginal Revenue Product

The additional revenue a firm generates from employing one more unit of input, such as labor or capital.