According to the Coase Theorem, When the Parties Affected by Externalities

question 1

Multiple Choice

According to the Coase theorem, when the parties affected by externalities can negotiate costlessly with one another

• A)An efficient outcome results if the liability is placed on the party with the lowest cost of prevention
• B)An efficient outcome results no matter how the law assigns responsibility
• C)Efficiency cannot be reached without government intervention
• D)The correct way to deal with an externality is to tax it

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Definitions:

Defense Mechanisms

In psychoanalytic theory, the mechanisms of the ego that serve to protect an individual from experiencing anxiety produced by conflicts with the id, superego, or reality.

Mental Energy

The capacity of the mind to engage in cognitive activities and processes, such as thinking, problem-solving, and focusing attention.

Psychoanalytic Thinking

A psychological perspective that emphasizes the influence of the unconscious mind on behavior, originating from the work of Sigmund Freud.

Processing Ability

The capacity of an individual to perceive, analyze, and respond to information in their environment.