The idea that even in the presence of externalities an economy can reach an efficient solution as long as transaction costs of making a deal are low is known as:
A)a Pigouvian tax.
B)a network externality.
C)a technology spillover.
D)the Coase theorem.

Question

Quizplus · Accepted Answer

The statement described is a basic summary of the Coase theorem. It states that even in the presence of externalities, an efficient solution can be reached through negotiations between affected parties as long as transaction costs are low. The theorem was articulated by economist Ronald Coase in his 1960 paper "The Problem of Social Cost."

The Idea That Even in the Presence of Externalities an Economy