The Coase Theorem suggests that the efficient solution to an externality problem:
A) depends on who owns property rights to the resources.
B) is enhanced by government involvement in the negotiations.
C) can be enhanced through the use of taxes.
D) does not depend on the distribution of property rights.

Question

Quizplus · Accepted Answer

The Coase Theorem posits that if property rights are well-defined and transaction costs are negligible, parties can negotiate to reach an efficient outcome regardless of the initial distribution of property rights.

The Coase Theorem Suggests That the Efficient Solution to an Externality