The Coase theorem states that if private parties can negotiate the purchase and sale of the right to perform activities that cause externalities, then they:
A. will never arrive at efficient solutions to the problems caused by externalities.
B. will never perform activities that generate negative externalities.
C. will always perform activities that generate positive externalities.
D. can always arrive at efficient solutions to the problems caused by externalities.
Answer: D
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Why do the sellers of some whiskeys pay for advertisements to tell people their whiskey is extremely expensive?
A) Because the sellers either do not know or do not accept the law of demand B) To allocate the product to people who will most appreciate it C) To increase the demand D) To lower the demand and keep production costs low E) To prevent "price shock" among potential customers
Travel services include purchases of items by residents of one country when they travel to another country
Indicate whether the statement is true or false
Instituting a rent control program will most likely lead to
A) a shortage of rental units. B) overly elaborate and expensive construction. C) an efficient allocation of existing units among consumers. D) an excess quantity supplied of rental units.
If all firms had to bear all the social costs of their actions, we should observe marginal cost curves
A) of all firms shifting up. B) of some firms shifting up, of some others shifting down, and of the rest not shifting at all. C) of all firms that had generated externalities shifting up while there would be no change for the rest of the firms. D) of some firms shifting up and of the rest shifting down.