Private contracts between parties with mutual interests
A)will reduce the well-being of society.
B)will lead to market outcomes in which the public interest is sacrificed for personal gain.
C)can solve some inefficiencies associated with positive externalities.
D)will create negative externalities.

Question

Quizplus · Accepted Answer

Private contracts between parties with mutual interests can solve some inefficiencies associated with positive externalities. For example, if two neighboring farmers agree to cooperate in reducing their pesticide use in order to prevent harmful runoff into a shared stream, this private agreement can reduce the negative externality of pollution while benefiting both parties.

Private Contracts Between Parties with Mutual Interests