The Coase Theorem suggests that under its assumption, 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

The Coase Theorem suggests that under its assumption, 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.

Quizplus · Accepted Answer

The Coase Theorem suggests that the efficient solution to an externality problem does not depend on the distribution of property rights. Coase argued that as long as property rights are clearly defined and transaction costs are low, private parties will bargain to reach an efficient solution regardless of who owns the property rights. Therefore, the outcome will be efficient, independent of who owns the property rights.

The Coase Theorem Suggests That Under Its Assumption, the Efficient