The Idea That Even in the Presence of Externalities an Economy

question 131

Multiple Choice

The idea that even in the presence of externalities an economy can reach an efficient solution as long as transaction costs of making a deal are low and property rights are well-defined is known as:

• A)a Pigouvian tax.
• B)a network externality.
• C)a technology spillover.
• D)the Coase theorem.

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Definitions:

Graph

A visual representation of data, which showcases the relationship between two or more variables through lines, bars, or other symbols.

Difference

The result of subtracting one value from another, often used in various contexts like mathematics, statistics, and economics.

X-Inefficiency

The difference between efficient behavior of businesses in a competitive market and their actual behavior due to a lack of competitive pressure.

Pure Competition

A market structure characterized by an unlimited number of small sellers, identical products, and free entry and exit, leading to perfect competition.