The Coase Theorem posits that if property rights are clearly defined and transaction costs are low, parties can negotiate to correct externalities and reach an efficient outcome without government intervention. High transaction costs are indeed identified as a barrier to achieving this efficiency.

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The Coase Theorem

Question 15

Multiple Choice

The Coase Theorem

A) suggests that government intervention is necessary for an efficient outcome.
B) is generally successful in assigning property rights for public goods.
C) points out that high transaction costs are a barrier to efficiency.
D) helps explain Arrow's Impossibility Theorem.
E) is an example of how Arrow's Impossibility Theorem can be implemented.

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