Table 11-1 This Table Describes the Defense Demands for Three Groups of Groups

question 244

Multiple Choice

Table 11-1
This table describes the defense demands for three groups of people in Happyville. The second, third, and fourth column shows the quantity that a group will demand for a given price (the first column) .

-Refer to Table 11-1.If the marginal cost of national defense is constant at $12 per unit,what is the efficient level of national defense to provide?

• A)6 units
• B)13 units
• C)22 units
• D)33 units

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Definitions:

Transaction Costs

The expenses incurred when buying or selling goods and services, which can include fees, commissions, and the costs of the time and effort involved in making the transaction.

Coase Theorem

A principle stating that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights.

Externalities

Monetary consequences or side effects that touch upon third parties not directly engaged, with potential for both positive or negative outcomes.

Private Bargaining

Private bargaining refers to the negotiation process between individuals or private entities without external intervention, aimed at reaching mutual agreements or resolving disputes.