When Negative Externalities Exist, a Voluntary Agreement Can Be Negotiated

Multiple Choice

When negative externalities exist, a voluntary agreement can be negotiated. Which of the following statements is TRUE?

A) Voluntary agreements usually do not work since the owner has no incentive to negotiate.
B) Transactions costs must be low relative to the expected benefits of reaching an agreement.
C) Voluntary agreements are difficult to negotiate because they usually involve government intervention.
D) Voluntary agreements always leave the owner worse off.