According to the Coase Theorem, private solutions to externalities can lead to the socially efficient outcome when:
I.transaction costs are negligible
II.property rights are clearly defined
IiI.the number of parties involved is small
A)(i), (ii), and (iii)
B)(i) and (ii) only
C)(iii) only
D)(ii) and (iii) only

Question

According to the Coase Theorem, private solutions to externalities can lead to the socially efficient outcome when:
I.transaction costs are negligible
II.property rights are clearly defined
IiI.the number of parties involved is small
A)​(i), (ii), and (iii)
B)​(i) and (ii) only
C)​(iii) only
D)​(ii) and (iii) only

Quizplus · Accepted Answer

The Coase Theorem suggests that private solutions to externalities can lead to socially efficient outcomes when transaction costs are negligible, property rights are clearly defined, and the number of parties involved is small. These conditions facilitate negotiation and agreement among parties affected by externalities.

According to the Coase Theorem, Private Solutions to Externalities Can