If Private Bargaining to Resolve an Externality Is to Result

question 172

Multiple Choice

If private bargaining to resolve an externality is to result in an efficient outcome,

• A) rights must be protected by liability rules.
• B) there must be tradable pollution rights.
• C) there must be direct regulation of externalities.
• D) the initial assignment of rights must be clear to both parties.

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Definitions:

Borrowed

Refers to money or goods taken on loan with the obligation to return it or pay it back, usually with interest, within a specified period.

Amount Owed

The total sum of money that is due or required to be paid to another party.

Interest Rate

The fraction of a monetary sum levied for the privilege of utilizing it, often indicated as a percentage per annum.

Term Deposits

A type of bank deposit that is held at a financial institution for a fixed term or period, where the money can be withdrawn only after the term ends or by giving a predetermined notice.