Private Parties May Choose Not to Solve an Externality Problem

question 166

True/False

Private parties may choose not to solve an externality problem if the transaction costs are large enough.

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Definitions:

Obligor

A contractual party who agreed to do something for the other party.

Merger Clause

A clause in a written agreement within the statute of frauds that states that the written agreement accurately reflects the final, complete version of the agreement.

Statute of Frauds

A legal principle that requires certain types of contracts to be written and signed to be enforceable.

Obligor's Consent

The necessary agreement or permission from the party obligated to perform under a contract or legal duty.