If the Costs of Negotiation Are Small but Not Negligible

question 19

Multiple Choice

If the costs of negotiation are small but not negligible,

• A)the best available 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 best way to deal with the externality is to tax it.

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Definitions:

Safety Procedures

Established protocols or actions designed to maintain safety and prevent harm in various environments or operations.

Wrongdoing

An act or behavior that is illegal or morally corrupt.

Cooling-Off Period

A legally defined time frame during which a consumer can cancel a contract without penalty, often associated with doorstep selling and financial agreements.

National Safety

Policies and measures implemented to ensure the physical safety and wellbeing of a country's citizens.