The Coase Theorem Suggests That Private Solutions to the Externality

question 158

Multiple Choice

The Coase theorem suggests that private solutions to the externality problem:

• A)will always allocate resources efficiently if private parties can bargain without cost
• B)are effective under all conditions
• C)are only efficient when there are negative externalities
• D)may not be possible because of the distribution of property rights

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Definitions:

Babbling

Early stage of language development in infants, characterized by the repetition of sounds and syllables without specific meaning.

Functional Fixedness

A cognitive bias that limits a person to using an object only in the way it is traditionally used, hindering problem-solving and creativity.

Anchoring

A cognitive bias that describes the common human tendency to rely too heavily on the first piece of information offered when making decisions (the "anchor").

Adjustment Heuristic

A mental shortcut used to make decisions or judgments based on how easily an example, instance, or case comes to mind.