The Distribution of Surplus Gained from Private Parties Solving an Externality

question 39

Multiple Choice

The distribution of surplus gained from private parties solving an externality problem on their own,as described by the Coase theorem,is dependent on:

• A) who has more power to see to enforcement.
• B) which party has more negotiating power or wealth.
• C) where the initial rights of the parties lie.
• D) None of these statements is true.

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Definitions:

Steady State

A condition where the variables (such as temperature, pressure, and volume in a system) are unchanging over time.

Drive-Reduction Theory

A psychological concept suggesting that motivation arises from biological needs that push organisms to seek homeostasis through reducing drives stemming from those needs.

Tension

The physical or emotional strain caused by conflicting or demanding circumstances.

Stability

The condition of being resistant to change or variation, often used in psychological contexts to refer to emotional or mental consistency.