The Coase theorem states that if transaction costs are low, the number of parties is small, and property rights are well established
A) the government must intervene to eliminate any externalities in the market.
B) private transactions are efficient.
C) there will be no pollution.
D) Both answers B and C are correct.

Question

Quizplus · Accepted Answer

The Coase theorem suggests that when transaction costs are low and property rights are clearly defined, private parties can negotiate to resolve externalities efficiently without government intervention. It does not imply that there will be no pollution, but rather that any pollution will be at an efficient level agreed upon by the parties involved.

The Coase Theorem States That If Transaction Costs Are Low