The Coase theorem is the idea that:
A)individuals can reach an efficient equilibrium through private trades, even in the presence of an externality.
B)there are always mutually beneficial trades waiting to be exploited, which creates a clear role for government taxation.
C)the actions of private individuals and firms are insufficient to ensure efficient markets.
D)None of these are true.

Question

Quizplus · Accepted Answer

The Coase theorem posits that if property rights are clearly defined and transaction costs are negligible, parties can negotiate to correct for externalities and reach an efficient outcome on their own, without government intervention.

The Coase Theorem Is the Idea That