Question

When dealing with negative​ externalities, government action is required A. only in environmental disputes. B. only if transactions costs preclude bargaining between polluter and victim. C. for any bargain to be successful. D. only if transactions cost are low.

Answer 1

Answer: B)only if transactions costs preclude bargaining between polluter and victim.

Explanation: Negative externalities is defined as the cost situation that arises due to the economic transaction. In this situation usually the third party(organization, owner of the property , any person) gets effected indirectly.

The government takes any step or interferes in this situation if the transaction cost is effecting the victim.The case can also lead to no settlement or bargaining between the the polluter(e.g.-company) and the victim(e.g.- public),thus.government takes action to resolve the matter.

Other options are incorrect because government interruption is  required many disputes related with victim and environment. Government can invoke bargaining or settlement but cannot make it successful , it can be carried out by victim and polluter only. If the transact cost is high and unreasonable for the victim ,then usually government takes action.Thus, the correct option is option(B) .