The Idea That Resource Allocation Can Remain Efficient, Even in the Presence

question 39

Multiple Choice

The idea that resource allocation can remain efficient, even in the presence of externalities, as long as property rights are clearly assigned and transactions costs are low is referred to as the:

• A) Law of Demand.
• B) Black/Schloes Formula.
• C) Coase Theorem.
• D) Law of Diminishing Returns.

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Definitions:

Debt Investments

Investments in bonds or other debt securities where the investor lends money to an entity in exchange for interest payments and the return of principal.

Accrued Annual Interest

Interest that has been incurred but not yet paid over a year, representing a liability for the borrower.

Sold Bonds

The action of issuing bonds to investors, raising capital by incurring long-term debt.

Long-Term Investment

A long-term investment is an account on the asset side of a company's balance sheet that represents the company's investments, including stocks, bonds, real estate, and cash, held for more than one year.