The Coase Theorem Tells Us That in the Presence of External

question 94

Multiple Choice

The Coase theorem tells us that in the presence of external costs in production,

• A)the government must intervene in the market to assure that the efficient level of output is produced.
• B)private parties can negotiate to produce the good at a level where marginal willingness to pay for the good by consumers is zero.
• C)private parties can never arrive at the efficient solution.
• D)then under certain conditions, private parties can arrive at the efficient solution without government involvement.
• E)and if transactions costs are high, then only the private sector will be able to produce the efficient amount of the good.

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Definitions:

Geometric Average

A method of calculating the average rate of return of a set of values by multiplying them together and taking the nth root, where n is the number of values, typically used for investment growth rates.

Compound Return

The rate at which an investment grows over time, taking into account the effect of compounding.

Holding Period Return

The total return received from holding an asset or portfolio of assets over a period of time, typically expressed as a percentage.

Capital Gain Yield

Capital gain yield refers to the price appreciation component of the total return on an investment, expressed as a percentage increase from the asset's purchase price.