In a market economy with well-defined property rights,the potential threat of a lawsuit or a liability judgment against a firm will give firms an incentive to:

Question

Quizplus · Accepted Answer

The potential threat of a lawsuit or liability judgment against a firm will make the firm responsible for any negative externalities caused by their production activities. To avoid facing any lawsuits, firms will have an incentive to decrease negative externalities from their production processes. This is because they will have to bear the costs associated with negative externalities such as pollution or health hazards. Hence, Option A is the correct answer.

In a Market Economy with Well-Defined Property Rights,the Potential Threat