Conditions for the Coase theorem are typically met, and thus markets alone can solve most externality problems.

Question

Quizplus · Accepted Answer

The Coase theorem assumes that property rights are well-defined and transaction costs are low, which is not always the case in real world situations. Additionally, there are some externalities that cannot be easily internalized by a market, such as global climate change. Therefore, the conditions for the Coase theorem are not always met, and markets alone cannot solve all externality problems.

Conditions for the Coase Theorem Are Typically Met, and Thus