Which of the following is the best description of the Coase Theorem?
A) Tariffs can improve economic efficiency.
B) Public goods are over-provided by the private market.
C) Bargaining between private parties to an economic exchange results in an efficient allocation of resources.
D) Only the government can force private parties to internalize externalities.

Question

Quizplus · Accepted Answer

The Coase Theorem states that if transaction costs are low and property rights are well-defined, then private parties can bargain and negotiate to reach an efficient allocation of resources regardless of initial distribution. In other words, bargaining between private parties can result in internalizing externalities and achieving the optimal outcome without government intervention.

Which of the Following Is the Best Description of the Coase