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- Subject
- Externality & Internalityeconomics-mcqs › externality-internality
- Published
- 1 Jun 2019
- Last updated
- 28 May 2026
Explanation
Transaction costs include expenses such as legal fees, enforcement costs, and those related to coordinating among many parties. However, the actual costs of reducing pollution are not considered transaction costs; they are the direct costs of mitigating the externality.
More Externality & Internality MCQs
Practice related questions from the same subject.
- 1.What is the primary function of tradable pollution permits?
- 2.The gas-guzzler tax imposed on new vehicles with poor fuel efficiency serves as an example of which economic concept?
- 3.Roberto and Thomas share a university dorm room. Roberto enjoys playing loud music, valuing it at €100, while Thomas prefers silence, valuing peace at €150. Assuming Roberto has the legal right to play loud music and there are no costs involved in negotiation, which of the following best describes an efficient outcome to this externality issue?
- 4.According to the Coase theorem, under what condition can private individuals effectively resolve externality issues?
- 5.What type of external effect is created when a person purchases a vehicle in a heavily trafficked city?
- 6.Which public policy is most effective in addressing a negative externality by internalizing its social costs?
- 7.What is the effect of an unaddressed negative externality on the market quantity produced?
- 8.What results from the presence of a negative externality in a market?
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