When _____ are ______, it will be difficult to reach a private solution.

a. transactions costs; high

b. transactions costs; low

c. externalities; visible

d. externalities, invisible

Marketable pollution rights _____.

a. make producers pay for polluting

b. are inherently wrong

c. give producers incentive to internalize external costs

d. do nothing to reduce pollution in the long run

An optimal corrective tax _____.

a. falls as quantity produced increases

b. is above the marginal external product

c. is a lump sum tax

d. helps to increase demand for the taxed product