Which statement is TRUE?
A) The Coase theorem suggests that the efficient equilibrium quantity of flu shots will maximize the sum of producer and consumer surplus.
B) It is easy to internalize the benefits of getting a flu shot because only two companies produce flu vaccines.
C) The market for flu shots could be efficient if the beneficiaries of the external benefits sufficiently compensated those receiving the shot.
D) To internalize the costs of getting a flu shot, people who receive the vaccine should pay other people to be vaccinated.

Question

Quizplus · Accepted Answer

The Coase theorem suggests that the allocation of resources can be efficient as long as the parties involved can negotiate and bargain to internalize the externalities. Therefore, it is possible for the market for flu shots to be efficient if those receiving the shots compensate the individuals who do not receive the shot but still benefit from the externalities. Option A is incorrect because the Coase theorem does not necessarily imply that the equilibrium quantity is efficient. Option B is incorrect because the number of firms in the market does not affect the ease of internalizing externalities. Option D is incorrect because paying others to get vaccinated does not help internalize the costs of getting a flu shot.

Which Statement Is TRUE