Private Solutions to the Problem of Externalities Are Most Likely

question 120

Multiple Choice

Private solutions to the problem of externalities are most likely when

• A)government actively encourages these solutions.
• B)transactions costs are low and the number of bargaining parties is small.
• C)transactions costs are low and the number of bargaining parties is large.
• D)transactions costs are low and the monetary damages to third parties are high.

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Definitions:

Maturation

The process of becoming mature, involving growth and development in the physical, biological, psychological, or emotional domains.

Empiricism

A philosophy that emphasizes the role of sensory experience and evidence in the formation of ideas, over the notion of innate ideas or traditions.

Behaviorism

A theory of learning based on the idea that all behaviors are acquired through conditioning, focusing on observable behaviors rather than internal states.

Habituation Technique

A method used in psychology to reduce the reaction to a repeated stimulus over time, demonstrating one of the simplest forms of learning.