The Coase theorem states that
A)government intervention is always needed if externalities are present.
B)assigning property rights is the only thing the government should do in a market economy.
C)if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities.
D)a free-market equilibrium is the best solution to address externalities.

Question

Quizplus · Accepted Answer

The Coase theorem suggests that if transactions costs are sufficiently low, private bargaining between affected parties can lead to an efficient solution to externalities. This means that government intervention may not be necessary in such situations. The theorem does not prescribe a free-market equilibrium or suggest that assigning property rights is the only role of the government.

The Coase Theorem States That