Compare Two Situations

question 223

Multiple Choice

Compare two situations. (A) A firm is not legally responsible for damages that result from air pollution caused by its production of steel. (B) A firm is legally responsible for damages that result from its production of steel. Ronald Coase argued that

• A) bargaining between the firm and the victims of the air pollution caused by the firm will result in little reduction of pollution in either situation (A) or (B) because the firm has greater economic and political power than the victims.
• B) bargaining between the firm and the victims of the air pollution caused by the firm would lead to a greater reduction in pollution in situation (A) than situation (B).
• C) bargaining between the firm and the victims of the air pollution caused by the firm would lead to a smaller reduction in pollution in situation (A) than situation (B).
• D) bargaining between the firm and the victims of the air pollution caused by the firm would lead to an equal reduction in pollution in situation (A) and situation (B).

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Definitions:

Closely Held Corporations

Corporations that have a small group of shareholders with no market for buying or selling company stock. They often involve family businesses.

General Public

Refers to the ordinary people in society who are not involved in any particular profession or specialized group.

S Corporation

A corporation that enjoys the tax status of a partnership.

Nonresident Alien

An individual who is not a U.S. citizen or resident but may have tax or legal obligations in the U.S. based on income or presence.