According to the Coase theorem,only when transaction costs are extremely high can two parties internalize a negative externality.

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The Coase theorem states that if transaction costs are low and property rights are well-defined, then two parties can negotiate and internalize an externality without government intervention. If transaction costs are high, however, it may not be possible for parties to negotiate and internalize the externality, and government intervention may be necessary. Therefore, the statement is false as it has the condition for internalizing the externality reversed.

According to the Coase Theorem,only When Transaction Costs Are Extremely