Private Parties May Choose Not to Solve an Externality Problem

question 166

True/False

Private parties may choose not to solve an externality problem if the transaction costs are large enough.

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Definitions:

Reinforcements

In psychology, the process of encouraging or establishing a pattern of behavior by offering rewards or consequences.

Conditioned Response

A learned response to a previously neutral stimulus that becomes associated with an unconditioned stimulus.

Unconditioned Stimulus

In classical conditioning, a stimulus that naturally and automatically triggers a response without any need for prior learning.

Stimulus

An external or internal change that influences the activity of a living organism or one of its parts.