According to the Coase Theorem, Externality Problems May Be Solved

question 125

Multiple Choice

According to the Coase theorem, externality problems may be solved if the parties involved can negotiate.Which of the following is also needed?

• A)clearly defined bargaining costs
• B)enforceable bargaining costs
• C)clearly defined, enforceable property rights and low bargaining costs
• D)a property right that cannot be bought or sold
• E)government regulation

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Definitions:

Primary Stock

Shares issued directly by a company to investors as a means of raising capital, often through an initial public offering (IPO).

Reduction In Risk

A decrease in the probability or impact of negative outcomes, often sought through insurance, safety measures, or other precautions.

General Motors

An American multinational corporation headquartered in Detroit that designs, manufactures, markets, and distributes vehicles and vehicle parts.

Diverse Portfolio

An investment strategy whereby an individual holds a variety of different investments to reduce risk through diversification.