The Coase theorem asserts that private economic actors can solve the problem of externalities among themselves, without government intervention, regardless of whether those actors incur significant costs in reaching and enforcing an agreement.

Question

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The Coase theorem posits that private economic actors can efficiently solve the problem of externalities among themselves without government intervention, but this is under the condition of zero transaction costs. If there are significant costs in reaching and enforcing an agreement, this condition is violated, and the theorem's conclusion may not hold.

The Coase Theorem Asserts That Private Economic Actors Can Solve