The Coase Theorem Tells Us That in the Presence of External

question 94

Multiple Choice

The Coase theorem tells us that in the presence of external costs in production,

• A)the government must intervene in the market to assure that the efficient level of output is produced.
• B)private parties can negotiate to produce the good at a level where marginal willingness to pay for the good by consumers is zero.
• C)private parties can never arrive at the efficient solution.
• D)then under certain conditions, private parties can arrive at the efficient solution without government involvement.
• E)and if transactions costs are high, then only the private sector will be able to produce the efficient amount of the good.

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Definitions:

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Sternberg

A psychologist known for his triarchic theory of intelligence, which categorizes human intelligence into analytical, creative, and practical dimensions.

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The ability to solve everyday problems through adaptive or creative reasoning and learning from experience.

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