If the Costs of Negotiation Are Small but Not Negligible

question 25

Multiple Choice

If the costs of negotiation are small but not negligible,

• 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:

Nature Provides

The concept that the natural world offers resources and conditions necessary to support life and fulfill needs.

Nature

The inherent qualities and characteristics of a person or thing, often contrasted with nurture which refers to the influence of the environment and learning.

Aristotle

An ancient Greek philosopher and polymath, whose works covered various disciplines including metaphysics, ethics, logic, and science.

Nurture

The influence of environmental factors like education and upbringing on an individual's development.