The Coase Theorem Argues That the Assignment of Property Rights

question 117

Multiple Choice

The Coase theorem argues that the assignment of property rights will generate an efficient solution to the problem of

• A)positive externalities as long as bargaining costs are small
• B)negative externalities as long as bargaining costs are small
• C)negative externalities as long as bargaining costs are great
• D)any type of market failure
• E)any type of market failure that involves high transaction costs

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Definitions:

Credit Balance

A credit balance occurs when the total credits in an account exceed the total debits, indicating the amount owed to the account holder or in the case of financial statements, to the creditor.

Factoring

A financial transaction where a business sells its accounts receivable to a third party (factor) at a discount to get immediate cash.

Nontrade Receivables

Amounts owed to a business that are not related to the sale of goods or services, such as tax refunds, advances to employees, or insurance claims.

Company Officers

Executives appointed by the board of directors responsible for managing the day-to-day operations and making major corporate decisions.