Which of the following statements is TRUE?
A) The Coase theorem suggests that the efficient equilibrium quantity of flu shots will maximize the sum of producer and consumer surplus.
B) It is easy to internalize the benefits of getting a flu shot because only two companies produce flu vaccines.
C) The market for flu shots could be efficient if the beneficiaries of the external benefits sufficiently compensated those receiving the shot.
D) To internalize the costs of getting a flu shot, people who receive the vaccine should pay other people to be vaccinated.

Question

Quizplus · Accepted Answer

The Coase theorem states that as long as transaction costs are low, efficient outcomes can be achieved through private bargaining, even in the presence of externalities. Therefore, if the beneficiaries of external benefits (such as reduced transmission of the flu) can sufficiently compensate those who receive the shot, the market for flu shots could be efficient. The other answer choices are incorrect. A suggests that the efficient equilibrium quantity will maximize the sum of producer and consumer surplus, which is not necessarily true in the presence of externalities. B is incorrect because there are many companies that produce flu vaccines, not just two. D is incorrect because paying others to be vaccinated would not internalize the costs, as the cost is not the payment but rather the potential side effects and inconvenience of receiving the shot.

Which of the Following Statements Is TRUE