One Difficulty in Using Voluntary Transactions to Internalize Externalities Is

question 262

Multiple Choice

One difficulty in using voluntary transactions to internalize externalities is that

• A) people are motivated by self-interest and are often unwilling to engage in a transaction that might make another person better off.
• B) the government usually will not enforce contracts of this type.
• C) transaction costs of coming to an agreement can be very large when numerous people are involved.
• D) people usually don't understand what the real opportunity costs are that they face.

---

Definitions:

Assembly Line

A manufacturing process in which parts are added to a product in a sequential manner to create a finished product efficiently.

Joint Costs

Costs that are incurred in the process of producing two or more products simultaneously up to the point where these products are separable.

Split-off Point

The stage in a production process where joint products can be recognized as distinct and separate products.

Split-off Point

The stage in a production process where multiple products become recognizably separate and independent from each other.