According to the Coase Theorem, When the Parties Affected by Externalities

question 1

Multiple Choice

According to the Coase theorem, when the parties affected by externalities can negotiate costlessly with one another

• A)An efficient outcome results if the liability is placed on the party with the lowest cost of prevention
• B)An efficient outcome results no matter how the law assigns responsibility
• C)Efficiency cannot be reached without government intervention
• D)The correct way to deal with an externality is to tax it

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