Suppose a Negative Externality Exists in a Market

question 169

Multiple Choice

Suppose a negative externality exists in a market.If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem,

• A)an efficient solution can be reached only if property rights are assigned to the victims of the pollution.
• B)an efficient solution can be reached only if property rights are assigned to the polluters.
• C)an efficient solution can be reached regardless of the initial assignment of property rights.
• D)government intervention is critical to reach an efficient solution.

---

Definitions:

CAPM Beta

CAPM Beta is a measure used in the Capital Asset Pricing Model to determine the volatility or systemic risk of an asset in relation to the market as a whole.

Expected Return

Expected return is the predicted amount of profit or loss an investment is anticipated to generate over a specific period.

Coefficient

A coefficient is a numerical or constant quantity placed before and multiplying the variable in an algebraic expression, often representing a measure of some property or effect.

Variation

The degree to which data points in a set differ from the mean value of the set, indicating the distribution and dispersion of the set.