The idea that even in the presence of externalities an economy can reach an efficient solution as long as transaction costs of making a deal are low and property rights are well-defined is known as:
A)a Pigouvian tax.
B)a network externality.
C)a technology spillover.
D)the Coase theorem.

Question

Quizplus · Accepted Answer

The idea described in the question is known as the Coase theorem, named after economist Ronald Coase. The Coase theorem states that in the presence of externalities, an efficient solution can be reached through private bargaining as long as property rights are well-defined and transaction costs are low. The theorem emphasizes the importance of defining clear property rights to encourage private bargaining between affected parties.

The Idea That Even in the Presence of Externalities an Economy