According to the Coase theorem,when will private markets solve externality problems and allocate resources efficiently
A)as long as private parties can bargain without cost
B)as long as government assigns property rights to the harmed party
C)as long as the externalities that are present are positive and not negative
D)as long as businesses determine an appropriate level of production

Question

Quizplus · Accepted Answer

According to the Coase theorem, private markets will solve externality problems and allocate resources efficiently as long as private parties can bargain without cost. This means that if transaction costs are low, private parties can negotiate and reach a mutually beneficial solution without the need for government intervention. This solution may involve payments from the party causing the externality to the affected party, or it may involve changing behavior to reduce or eliminate the externality. Therefore, option A is the correct answer.

According to the Coase Theorem,when Will Private Markets Solve Externality