Which one of the following factors would NOT lessen the ability of the Coase theorem to solve an externality?
A) Negotiating requires lawyers and legal documents.
B) Many individuals bear the external cost.
C) The externality is an external benefit.
D) Many individuals generate the external cost.
E) The parties involved distrust and dislike each other.

Question

Quizplus · Accepted Answer

The Coase theorem can still be applied to solve an externality even if it is an external benefit rather than an external cost. The other options listed can all hinder the ability of the Coase theorem to solve an externality in some way.

Which One of the Following Factors Would NOT Lessen the Ability