Suppose a Negative Externality Exists in a Market

question 16

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 equitable solution can be reached only if property rights are assigned to the victims of pollution and not the polluters.
• B) an equitable solution can be reached only if property rights are assigned to polluters and not to the victims of pollution.
• C) an efficient solution can be reached regardless of the initial assignment of property rights.
• D) government intervention is necessary to reach an efficient and equitable solution.

---

Definitions:

Union Suppression

Strategies or actions taken by employers to discourage unionization or diminish the influence of unions within their organization.

Racism

Prejudice, discrimination, or antagonism directed against someone of a different race based on the belief that one's own race is superior.

Discrimination

Unfair or unequal treatment of individuals based on characteristics such as race, gender, age, or sexual orientation, contrary to principles of equality and justice.

Labor Unions

Organizations formed by workers from related fields that work for the betterment of their members' working conditions, wages, and benefits.