When Negative Externalities Exist, a Voluntary Agreement Can Be Negotiated

question 56

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.

---

Definitions:

Nevada Corporation

A corporation chartered in the state of Nevada, often chosen for its favorable corporate laws and tax rules.

California

A U.S. state located on the West Coast of the United States, known for its diverse geography, climate, and influential entertainment industry.

Taxes

Compulsory financial charges imposed by a government on individuals or entities to fund public expenditures, providing various public goods and services.

Foreign Corporation

A business entity that is registered under the laws of a state or country different from where it actually does business.