Externalities between two firms can be "internalized" if: Which statement(s)correctly complete(s)the sentence?
I.The two firms merge.
II.Bargaining costs are zero.
III.The externalities affect each firm equally.
IV.Marginal costs for both firms are constant.
A)Only II.
B)All except III.
C)I and II,but not III and IV.
D)I and IV,but not II and III

Question

Quizplus · Accepted Answer

Externalities between two firms can be "internalized" if the firms merge, allowing them to directly manage the externalities within a single organization, or if bargaining costs are zero, which would facilitate agreements to address the externalities as per the Coase theorem. The effects of the externalities on each firm or the nature of their marginal costs do not inherently facilitate internalization.

Externalities Between Two Firms Can Be "Internalized" If: Which Statement(s)correctly