Transaction costs are
A) the costs, such as sales taxes, that are imposed by the government.
B) equal to the hourly cost of a lawyer used to write a contract.
C) the costs associated with making, reaching, and enforcing agreements.
D) not true costs because they relate to time rather than real resources.
Answer: C
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A risk-averse individual is offered a gamble that promises a gain of $1000 with probability 0.25 and a loss of $300 with probability 0.75 . Given this situation, he or she will:
a. definitely take the gamble. b. definitely not take the gamble. c. definitely take the gamble if his or her income is high enough. d. take an action that cannot be determined given the information available.
Which of the following is not a solution to the problem of negative externalities due to pollution?
a. Create private property rights. b. Levy pollution taxes. c. Create obligatory controls. d. Reward the production of these products through subsidies. e. Establish strict limits on the amount of pollution allowed.