The Proposition That If Private Parties Can Bargain Without Cost

question 223

Multiple Choice

The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own, is called

• A)the Pigovian theorem.
• B)a corrective tax.
• C)the externality theorem.
• D)the Coase theorem.

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Definitions:

Financial Ratios

Quantitative measures derived from a company's financial statements, used to evaluate its financial health, performance, and viability.

Financial Statements

Reports that summarize the financial performance and condition of a business, including the income statement, balance sheet, and cash flow statement.

Working Capital

The difference between a company's current assets and its current liabilities, indicating the liquidity available to run its operations.

Current Ratio

A measure of a business's capacity to cover its short-term liabilities, found by the ratio of current assets to current liabilities.