To Cater to the Growing Demand of Luxury Cars,Terabithia Republic

question 64

Multiple Choice

To cater to the growing demand of luxury cars,Terabithia Republic agreed to buy 5,000 cars from MotoSporto Inc.in exchange for 5,000 gallons of oil.Due to a lack of trust,Terabithia decided to make it a one-time-only deal.Which of the following forms of countertrade is the country most likely to use?

• A) Counterpurchase
• B) Offset
• C) Switch trading
• D) Barter
• E) Buyback

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Definitions:

Coase Theorem

A principle that asserts if property rights are clearly defined and transaction costs are low, private negotiations will lead to the efficient resolution of disputes over the allocation of resources.

Transaction Costs

The costs that parties incur during the process of agreeing to and following through on a bargain.

Mutually Beneficial Agreement

An arrangement between parties where both or all receive benefits or advantages.

Coase Theorem

A legal and economic theory that states that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property.