The Coase Theorem Asserts That, If Externalities Are Present and If

question 226

Multiple Choice

The Coase theorem asserts that, if externalities are present and if private parties can bargain over the allocation of resources at no cost, then

• A)the private market will reach an equilibrium in which resources are allocated inefficiently.
• B)the private market will reach an equilibrium in which resources are allocated efficiently.
• C)the private market cannot reach an equilibrium.
• D)a mixture of corrective taxes and subsidies is necessary for a socially optimal equilibrium.

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Definitions:

Discrimination Coefficient

A quantitative measure in statistics that assesses the discriminating power of a variable in differentiating between two or more groups.

Nonpreferred Workers

Employees or workforce segments considered less favorable for hiring, often due to biases or stereotypes, not necessarily related to their skills or abilities.

Wage Rate

An alternative expression for the compensation paid to an employee per unit of time worked, typically measured on an hourly basis.

Employment

The state of having paid work or the act of providing jobs for workers, contributing to an economy's labor force.