Question

Private solutions to externalities are most effective if ________. transaction costs associated with bargaining are high transaction costs associated with bargaining are low a large number of people are affected by the externalities property rights are not defined clearly

Answer 1

Transaction costs associated with bargaining are low.

Step-by-step explanation:

Private solutions to externalities are most effective if transaction costs associated with bargaining are low. Private actors can arrive at a solution in the presence of an externality but without the government's intervention. Transaction cost is the cost in which the parties incur when trying to arrive at an acceptable solution. So when the transaction costs are low, private solutions to externalities are most effective.