If Transaction Costs of Negotiating Are ____, the ____ Suggests

question 30

Multiple Choice

If transaction costs of negotiating are ____, the ____ suggests that the private market ____ allocate resources.

• A)​high; Externality Theorem; will efficiently
• B)​high; Coase Theorem; will not efficiently
• C)​low; Coase Theorem; will efficiently
• D)​both b and c

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Definitions:

Income Bond

A type of bond that only pays interest if the issuing corporation has earned enough income to cover the interest payments, often used by companies in financial distress.

Registered Form

Registrar of company records ownership of each bond; payment is made directly to the owner of record.

Bond Issue

The process by which a corporation or government raises capital by selling bonds to investors, which are debt securities obligating the issuer to pay interest at predetermined intervals and to repay the principal at maturity.

Registrar

is an organization or entity responsible for keeping records of bondholders and shareholders for companies and financial institutions.