The Coase theorem states that
A)patents and copyrights will solve the problem of external costs.
B)taxes will solve the problem of external costs.
C)global warming is hard to solve due to the prisoners' dilemma aspect of the problem.
D)property rights are social arrangements governing ownership, use and disposal of factors of production and goods and services.
E)if property rights are established, and if only a small number of parties are involved, and if transactions costs are low, then private transactions are efficient.

Question

Quizplus · Accepted Answer

The Coase theorem states that if property rights are established, and if only a small number of parties are involved, and if transactions costs are low, then private transactions are efficient in resolving externalities or problems of external costs. Therefore, option E is the correct choice. Options A, B, and C are incorrect because they do not accurately reflect the Coase theorem. Option D also describes property rights but does not directly relate to the Coase theorem.

The Coase Theorem States That