The Coase Theorem suggests that the government does not have to be involved at all in resolving a market failure due to externalities.

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The Coase Theorem suggests that if property rights are well-defined and transaction costs are low, parties can negotiate and reach an efficient outcome on their own without government intervention. The government's involvement may still be necessary if transaction costs are high or property rights are not well-defined.

The Coase Theorem Suggests That the Government Does Not Have