Suppose a Negative Externality Exists in a Market

question 169

Multiple Choice

Suppose a negative externality exists in a market.If transactions costs are low and parties are willing to bargain, then, according to the Coase theorem,

• A)an efficient solution can be reached only if property rights are assigned to the victims of the pollution.
• B)an efficient solution can be reached only if property rights are assigned to the polluters.
• C)an efficient solution can be reached regardless of the initial assignment of property rights.
• D)government intervention is critical to reach an efficient solution.

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Definitions:

Observable Behavior

Actions or reactions of an organism or system that can be noticed and measured objectively by others.

Systematic Desensitization

A behavioral therapy technique used to reduce phobic reactions and anxiety through gradual exposure to the feared object or situation paired with relaxation exercises.

Classical Conditioning Principles

The key concepts of classical conditioning, including the processes of acquisition, extinction, spontaneous recovery, generalization, and discrimination.

Flooding

A psychological therapy technique aimed at reducing phobias and anxiety through forced exposure to the feared stimuli or situation.