The Coase Theorem states that

A. if transaction costs are low, private deals will create externalities and result in inefficient outcomes.

B. if transaction costs are low, private bargaining will result in an efficient solution to the problem of externalities.

C. if transaction costs are low, the government will regulate an efficient solution to the problem of externalities.

D. if transaction costs are low, private markets will create externalities and result in efficient outcomes.

E. if imposed on free markets, government regulations will result in inefficient outcomes and create deadweight loss.

Question

Business

Alec

15 August, 08:33

The Coase Theorem states that

A. if transaction costs are low, private deals will create externalities and result in inefficient outcomes.

B. if transaction costs are low, private bargaining will result in an efficient solution to the problem of externalities.

C. if transaction costs are low, the government will regulate an efficient solution to the problem of externalities.

D. if transaction costs are low, private markets will create externalities and result in efficient outcomes.

E. if imposed on free markets, government regulations will result in inefficient outcomes and create deadweight loss.

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Answers (1)

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Sebastian Molina · Answer 1

Answer:B. if transaction costs are low, private bargaining will result in an efficient solution to the problem of externalities.

Explanation:

The coarse theorem:

If there is a conflict between parties this will lead to an effecient results irrespective of who won the right to the property as long as the transaction cost related to the price negotiation is insignificant.