Private Solutions to the Problem of Externalities Are Most Likely

question 76

Multiple Choice

Private solutions to the problem of externalities are most likely when

• A)government actively encourages these solutions.
• B)transactions costs are low and the number of bargaining parties is small.
• C)transactions costs are low and the number of bargaining parties is large.
• D)transactions costs are low and the monetary damages to third parties is high.

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Definitions:

Accounts Receivable

Funds that customers owe to a firm for delivered goods or services which have not yet been settled.

Bad Debt Expense

The portion of receivables that a company does not expect to collect, often treated as an expense in the income statement.

National Credit Card

A credit card that is widely accepted across a given nation, often issued by major banks or credit card companies.

Retailers

Businesses that sell goods or services directly to consumers.