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.

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Definitions:

Sensorimotor

Pertaining to the combined processes of sensory input and motor response; often related to the developmental stage in infants where they explore the world through their senses and actions.

Preoperational

Refers to the stage in Piaget's theory of cognitive development where children aged 2 to 7 years old use symbols and language but do not yet understand mental operations or logical thinking.

Formal Operational

The fourth and final stage of Jean Piaget's theory of cognitive development, occurring from around age 12 and beyond, marked by the ability to think abstractly, logically, and systematically.

Concrete Operational

A stage in Piaget's theory of cognitive development where children gain the ability to think logically about concrete events.