A transaction between A and B benefits both parties by 50,but imposes a cost on C of 20.C has the right to prevent the transaction.A "coordination failure" in this situation
A)is the cost imposed on C.
B)is the ability of C to prevent a transaction that still has a net overall gain of 80.
C)would occur if A and B do not compensate C by 20 or more to allow the transaction.
D)is that the cost to C is not 100.

Question

Quizplus · Accepted Answer

A coordination failure occurs when a mutually beneficial transaction cannot occur due to the inability of the parties to coordinate and overcome an obstacle. In this case, the obstacle is the cost imposed on C. Therefore, the coordination failure can be avoided if A and B compensate C by an amount equal to or greater than the cost imposed on them. This would allow the transaction to occur, benefiting all parties involved. B is not a coordination failure because C is within their rights to prevent a transaction if they perceive it to be harmful to their interests. A and D are incorrect because they do not accurately describe a coordination failure.

A Transaction Between a and B Benefits Both Parties by 50,but