Private Solutions Often Are Not Possible Due to the Costs

question 171

Multiple Choice

Private solutions often are not possible due to the costs of negotiating and enforcing these solutions. Such costs are called:

• A)​transaction costs.
• B)​external costs.
• C)​deadweight losses.
• D)​social costs.

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Definitions:

Real Return Bonds

Bonds issued by the federal government that offer inflation protection to investors.

Income Bonds

These are a type of debt security where interest payments depend on the issuer's earnings, meaning if the issuer's earnings are insufficient, the bondholders may not receive interest payments.

Regular Bonds

Standard debt securities issued to investors that pay fixed or floating interest rates until maturity, where the principal amount is then repaid.

Bankrupt

A legal status of a person or entity that cannot repay debts to creditors and seeks the relief of such debts through court proceedings.