Private Solutions to the Problem of Externalities Are Most Likely

question 140

Multiple Choice

Private solutions to the problem of externalities are most likely when

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

---

Definitions:

Work in Process Inventory

Goods that are in the production process but are not yet completed.

Direct Materials

Materials in their unprocessed or natural state that can be directly linked and assigned to the end product during the production phase.

Work in Process

Inventory that is in the production process and has not yet been completed or turned into final goods.

Labeling Department

A section within a manufacturing process dedicated to attaching labels to products, outlining product information or branding.