The Coase Theorem States That

question 183

Multiple Choice

The Coase theorem states that

• A)government intervention is always needed if externalities are present.
• B)assigning property rights is the only thing the government should do in a market economy.
• C)if transactions costs are low, private bargaining will result in an efficient solution to the problem of externalities.
• D)a free-market equilibrium is the best solution to address externalities.

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Definitions:

Book Value

The value of a company's asset as it appears on the balance sheet, calculated as the cost of the asset minus accumulated depreciation.

Merchandise Inventory

Goods or products that a retailer, wholesaler, or distributor holds for the purpose of selling to customers.

Gain on Realization

Profit recognized from selling an asset for more than its book value.

Loss or Gain

The financial result from business transactions, investments or other financial events, indicating a profit (gain) or a deficit (loss).