The result that, under certain conditions, government intervention is unnecessary to fix a negative externality because it can be eliminated through bargaining between the affected people is called
A. the Coase Theorem.
B. collective bargaining.
C. a Nash equilibrium.
D. social justice.
Answer: A
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The size of the underground economy would tend to decrease if the government of a country
A) increased income tax rates. B) increased business taxes. C) decreased government regulations on businesses. D) made over-the-counter drugs illegal.
When products from a high-cost country within a customs union replace imports from a low-cost country that is not a member of the union, this is called:
a. trade creation. b. trade diversion. c. trade deflection. d. trade development.
Suppose real GDP is $12.6 trillion and potential GDP is $12.4 trillion. To move the economy back to potential GDP, Congress should
A) lower government purchases by an amount less than $200 billion. B) lower government purchases by $200 billion. C) raise taxes by $200 billion. D) lower taxes by $200 billion. E) raise taxes by an amount more than $200 billion.
In the above table, the marginal cost of the ninth unit is
A. $5.00. B. $7.00. C. $6.00. D. $4.00.