Describe the Coase theorem and explain why it is significant in the analysis of externatility problems.
What will be an ideal response?
The Coase theorem states that in the case of trivial or zero transaction costs, the property rights assignment does not matter to the resource allocative outcome. Alternatively stated, the Coase theorem can be stated that in the case of trivial or zero transaction costs, a property rights assignment will be undone if it benefits the relevant parties to undo it. It is significant because it shows that under certain conditions the market can internalize externalities, and it provides a benchmark for analyzing externality problems.
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________ taxes represent about a third of the federal government's receipts
A) Excise B) Corporate income C) Payroll D) Personal income
The major factor contributing to the depreciation of the Euro in 1999 and 2000 was:
A) low interest rates in the U.S. relative to Europe. B) high interest rates in the U.S. relative to Europe. C) trade barriers in Europe. D) none of the above.
Which is NOT an example of moral hazard
a. people eat less at all-you-can-eat buffets b. loggers clear-cut a tract of land rather than when paying per tree felled c. Drivers of heavier, safer cares are more likely to run stop signs d. workers on commission work harder than those paid an hourly wage
The situation in which the marginal product of labor is greater than zero and declining as more labor is hired is called the law of:
a. negative response. b. inverse return to labor. c. diminishing returns. d. demand.