Government intervention will not be necessary when voluntary contracting internalizes an externality. Which of the following is NOT a necessary condition for this to occur?

Question

Quizplus · Accepted Answer

Large numbers of individuals involved in the transactions actually make it difficult for voluntary contracting to internalize an externality. This is because coordination among a large number of individuals can be difficult, leading to the free-rider problem and a lack of cooperation in contracting. Therefore, low transaction costs (B), well-defined private property rights (A), and low contract enforcement costs (D) are all necessary conditions for voluntary contracting to internalize an externality, but large numbers of individuals involved in the transactions (C) are not.

Government Intervention Will Not Be Necessary When Voluntary Contracting Internalizes