Which of the Following Statements Is Most Consistent with Ronald

question 95

Multiple Choice

Which of the following statements is most consistent with Ronald Coase's theory of externalities?

• A)"If a factory pollutes,a tax imposed on the polluter by the government that is equal to the unit cost of the damage from the pollution brings about an efficient outcome."
• B)"When a firm emits pollutants it is imposing a cost on the rest of society,which makes us worse off.Taxes are therefore needed to eradicate pollution."
• C)"An externality occurs when firm A,while producing something for firm C,imposes costs on firm B.By imposing a tax on firm C,we can achieve the efficient level of production."
• D)"An externality occurs when two parties conflict over the use of a common resource.An efficient outcome will result if property rights are defined and the two parties can bargain."

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Definitions:

Price

The sum of money needed to buy a product, service, or asset.

Quantity

The quantity of a tangible or intangible product or service.

Inelastic Region

The inelastic region on a demand curve represents a range where a change in price has little to no effect on the quantity demanded of a good or service.

Demand Curve

A graphical representation showing how the quantity demanded of a good or service varies with its price, ceteris paribus.