The Coase Theorem:

Question

The Coase Theorem:

Quizplus · Accepted Answer

The Coase Theorem suggests that in some circumstances, government intervention is not needed to resolve externality problems. Specifically, it states that as long as property rights are clearly defined and transaction costs are low, individuals can negotiate and reach mutually beneficial agreements to internalize externalities without government intervention. This only applies to situations where externalities are not extensive and bargaining costs are not prohibitively high.