Private Solutions to the Problem of Externalities Are Most Likely

question 76

Multiple Choice

Private solutions to the problem of externalities are most likely when

• A)government actively encourages these solutions.
• B)transactions costs are low and the number of bargaining parties is small.
• C)transactions costs are low and the number of bargaining parties is large.
• D)transactions costs are low and the monetary damages to third parties is high.

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Definitions:

Managed Futures

Investment strategies that involve the use of futures contracts as part of a broader investment strategy managed by professional investment managers.

Market-neutral Hedge Funds

Investment funds that seek to generate returns by exploiting price differences between related assets while maintaining a neutral exposure to market movements.

Directional Long Funds

Investment funds that aim to profit from an anticipated upward movement in the price of the assets they hold.

Betas

A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole.