The Coase Theorem points out that externality problems can be eliminated if the number of parties involved is small and if property rights
A) are eliminated.
B) are granted to either consumers or producers and transactions costs are low.
C) are granted solely to producers.
D) are granted solely to consumers.

Question

Quizplus · Accepted Answer

The Coase Theorem suggests that if property rights are clearly defined (whether for consumers or producers) and transaction costs are low, parties can negotiate solutions to externalities on their own, effectively internalizing the externality. This process allows for efficient outcomes without the need for government intervention.

The Coase Theorem Points Out That Externality Problems Can Be