The Coase theorem states that
A)under certain circumstances government intervention is not needed to reach efficient outcomes when an externality is present.
B)government intervention is always required to reach an efficient outcome when an externality is present.
C)government intervention cannot lead to an efficient outcome when an externality is present.
D)only negative externalities can be resolved using government intervention.

Question

Quizplus · Accepted Answer

The Coase theorem states that if property rights are clearly defined and transaction costs are low, then private parties can bargain and reach an efficient outcome without the need for government intervention. This assumes that there are no other market failures present and that both parties have full information about the costs and benefits of the transaction. Therefore, option A is the best choice.

The Coase Theorem States That