Coase Theorem. Suppose a power plant reduced recreational opportunities by fouling a nearby river. A natural result would be for local environmentalists and consumers to petition local authorities for regulations outlawing or severely limiting such anti-social behavior. On the other hand, others might argue that there exist efficient and effective private-market solutions to such pollution problems.
A. What is the Coase Theorem?
B. Use the Coase Theorem to explain how the private sector might efficiently deal with pollution problems.

Question

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The Answer of Coase Theorem. Suppose a power plant reduced recreational opportunities by fouling a nearby river. A natural result would be for local environmentalists and consumers to petition local authorities for regulations outlawing or severely limiting such anti-social behavior. On the other hand, others might argue that there exist efficient and effective private-market solutions to such pollution problems.
A. What is the Coase Theorem?
B. Use the Coase Theorem to explain how the private sector might efficiently deal with pollution problems.