According to the Coase theorem, externality problems
A)do not exist in reality, because all costs and benefits are internal to firms.
B)can be solved through private negotiations without the need for government intervention.
C)must only be resolved by government action, through either taxes or subsidies.
D)can never be resolved adequately, because one party always gains while the other loses.

Question

Quizplus · Accepted Answer

The Coase theorem suggests that if property rights are clearly defined and transaction costs are low, externalities (costs or benefits that affect a party who did not choose to incur that cost or benefit) can be efficiently resolved through private negotiations without the need for government intervention.

According to the Coase Theorem, Externality Problems