Which of the following must be present to reach a private solution to an externality problem?
A)A majority of the parties affected by the externality must agree to a solution.
B)The transactions costs to negotiate a solution must be relatively low.
C)The total number of people, creators of the problem and those affected, must be relatively large to justify negotiating a solution.
D)The government must approve the solution for it to be a legal solution.

Question

Quizplus · Accepted Answer

For a private solution to be reached, the parties affected by the externality must be able to negotiate a mutually agreeable solution. If the transactions costs to negotiate a solution are too high, then parties may not be willing to engage in negotiation and a private solution is unlikely. The other options are not necessarily required for a private solution to be reached.

Which of the Following Must Be Present to Reach a Private