When Negative Externalities Exist, a Voluntary Agreement Can Be Negotiated

question 210

Multiple Choice

When negative externalities exist, a voluntary agreement can be negotiated. Which of the following statements is true?

• A) Voluntary agreements usually do not work since the owner has no incentive to negotiate.
• B) Transactions costs must be low relative to the expected benefits of reaching an agreement.
• C) Voluntary agreements are difficult to negotiate because they usually involve government intervention.
• D) Voluntary agreements always leave the owner worse off.

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Definitions:

Bases of Individual Power

Refers to the sources from which an individual derives their ability to influence others, such as expertise or position.

Rosabeth Moss Kanter

A renowned professor of business at Harvard Business School, known for her research on change management and confidence.

Power

The ability or capacity to influence or control the behavior of others, often through the possession of knowledge, resources, or authority.

Dependence

A situation in which one entity relies on another for support, resources, or needs fulfillment.