According to the Coase Theorem, Private Parties Can Solve the Problem

question 22

Multiple Choice

According to the Coase theorem, private parties can solve the problem of externalities if

• A)the cost of bargaining is small.
• B)the initial distribution of legal rights favors the person being adversely affected by the externality.
• C)the number of parties involved is sufficiently large.
• D)All of the above are correct.

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Definitions:

Familism

The belief that family members should support one another, sacrificing individual freedom and success, if necessary, in order to preserve family unity and protect the family from outside forces.

Individual Freedom

Refers to the rights and freedoms that allow an individual to act and make decisions without external constraints or coercion.

Ethnic Connectedness

Describes the level of attachment and belongingness an individual feels towards their ethnic group.

Peer Pressure

Encouragement to conform to one’s friends or contemporaries in behavior, dress, and attitude; usually considered a negative force, as when adolescent peers encourage one another to defy adult authority.