Why is a solution to climate change unlikely to stem from private bargaining between the polluters and the victims? Refer to each of the four types of transactions costs discussed in Chapter 8 to answer the question
What will be an ideal response?
All of the transactions costs, the search costs, the collectivization costs, the negotiation costs, and the monitoring and enforcement costs, would be extremely high, which would make finding a solution to climate change through private bargaining highly unlikely. With the high transactions costs, government involvement in finding a solution seems much more likely.
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In the economic way of thinking, which statement makes the most sense?
A) Costs determine prices. B) Prices determine costs. C) Costs determine demand. D) Demand determines supply.
The default risk premium is
A) relevant only for securities issued by very small companies. B) the additional yield a saver requires for holding a bond with some default risk. C) zero for corporate bonds, but quite substantial for corporate stock. D) constant across the business cycle.