The proposition that if private parties can bargain without cost over the allocation of resources,they can solve the problem of externalities on their own,is called
A) the Pigouvian theorem.
B) a corrective tax.
C) the externality theorem.
D) the Coase theorem.

Question

Quizplus · Accepted Answer

The Coase theorem states that if private parties can bargain without cost, they can solve externalities on their own regardless of the initial allocation of property rights. Therefore, the correct answer is D. The other options (A, B, and C) are not the correct answers to the given question.

The Proposition That If Private Parties Can Bargain Without Cost