The Coase theorem asserts that:
A) Government taxation of production is necessary for the socially efficient allocation of productive resources.
B) Government should not intervene in the market to promote a socially efficient allocation of productive resources.
C) Government should compensate groups harmed by negative externalities by taxing groups that have benefitted by creating negative externalities.
D) A socially efficient allocation of productive resources in a market economy is possible provided that private property rights are well defined.
E) None of the above. The Coase theorem deals with problems arising from asymmetric information.

Question

Quizplus · Accepted Answer

The Coase theorem posits that if private property rights are well-defined and transaction costs are negligible, parties can negotiate to correct for externalities and reach a socially efficient outcome without government intervention.

The Coase Theorem Asserts That