The Coase theorem will apply only if
A)an individual who is not affected by the externality can negotiate a settlement between the parties imposing the externality and the parties that are harmed by the externality.
B)the small number of people are involved.
C)the market is perfectly competitive.
D)the courts can be used to determine the amount of compensation that must be made to the damaged party.
E)the amount of compensation that must be made to the damaged party is small.

Question

Quizplus · Accepted Answer

The Coase theorem applies when there are a small number of parties involved, allowing them to negotiate solutions to externalities without high transaction costs.

The Coase Theorem Will Apply Only If