In Attempting to Find and Purchase High-Quality Cosmetics,Megan Reminds Herself

question 209

Multiple Choice

In attempting to find and purchase high-quality cosmetics,Megan reminds herself that the most expensive brands are the best.Megan's self-reminder illustrates the use of

• A) an algorithm.
• B) trial and error.
• C) framing.
• D) a heuristic.

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Definitions:

Externalities

Economic side effects or consequences that affect uninvolved third parties; can be positive or negative.

External Costs

Costs generated by a production or consumption activity that are not borne by the producer or consumer but by society at large.

Transaction Costs

Costs associated with the process of buying and selling, including search and information costs, bargaining costs, and enforcement costs.

Coase Theorem

A theory that suggests that if property rights are well-defined and transaction costs are low, externalities will be efficiently resolved through bargaining between parties.