The Coase Theorem Suggests That Private Solutions to an Externality

question 343

Multiple Choice

The Coase theorem suggests that private solutions to an externality problem

• A)are effective under all conditions.
• B)will usually allocate resources efficiently if private parties can bargain without cost.
• 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:

Trait Theory

A psychological approach focused on the quantification and analysis of personality traits or characteristics that are consistent over time and situation.

Positive Reinforcement

Involves the addition of a rewarding stimulus following a desired behavior, increasing the likelihood of that behavior being repeated.

Negative Punishment

A behavior modification technique where a desirable stimulus is removed after a particular behavior, with the aim of decreasing that behavior.

Negative Reinforcement

A behavior modification technique where the removal of an unfavorable outcome or stimulus strengthens or increases the likelihood of a specific response or behavior.