The Coase theorem suggests that private parties

Question

Quizplus · Accepted Answer

The Coase theorem suggests that private parties can negotiate to correct a negative externality if there are no barriers to negotiation, such as transaction costs, asymmetric information, or lack of property rights. Thus, the outcome depends on the specific situation and the ability and willingness of the parties to bargain and reach an efficient solution. However, the Coase theorem does not guarantee that the outcome will be optimal or that bargaining will always be possible or feasible, especially when there are more than two parties involved or the harm caused by the externality is too great. Therefore, options A, B, D, and E are incorrect.

The Coase Theorem Suggests That Private Parties