One Difficulty in Using Voluntary Transactions to Internalize Externalities Is

question 262

Multiple Choice

One difficulty in using voluntary transactions to internalize externalities is that

• A) people are motivated by self-interest and are often unwilling to engage in a transaction that might make another person better off.
• B) the government usually will not enforce contracts of this type.
• C) transaction costs of coming to an agreement can be very large when numerous people are involved.
• D) people usually don't understand what the real opportunity costs are that they face.

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Definitions:

Per Capita GDP

A metric that measures a country's economic output per person, dividing the GDP of a country by its population; often used to compare economic prosperity across countries or regions.

Population

The total number of people inhabiting a particular country, area, or place.

Psychological Strain

Psychological strain refers to the stress or tension experienced by individuals due to various psychological pressures or challenges.

Economic Resources

The assets and inputs required for the production of goods and services, including land, labor, capital, and entrepreneurship.