According to the Coase theorem,when negative externalities are present,a market will:
A)always reach an efficient solution.
B)reach an efficient solution if transaction costs are low and property rights are well-defined.
C)reach an efficient solution only if the government intervenes in the market with a tax.
D)reach an efficient solution only if the negative externalities are offset by positive externalities.

Question

Quizplus · Accepted Answer

The Coase theorem states that a market will reach an efficient solution when negative externalities are present, but only if transaction costs are low and property rights are well-defined. In other words, if the affected parties can negotiate and make costless bargains, the market will reach an efficient outcome without any need for government intervention or taxes. However, if transaction costs are high, it may be difficult for the parties to reach an efficient solution on their own, and government intervention or taxes may be necessary. Positive externalities are not relevant to the Coase theorem, as it focuses only on negative externalities.

According to the Coase Theorem,when Negative Externalities Are Present,a Market