The Coase Theorem Posits That Externality Problems Can Be Solved

question 238

Multiple Choice

The Coase theorem posits that externality problems can be solved without government intervention:

• A) when transaction costs are low and property rights are clearly defined.
• B) when trading in tradable allowances occurs.
• C) if markets can reach the efficient quantity and if transaction costs exceed the deadweight loss caused in the market.
• D) only rarely, that in general, markets cannot maximize social surplus.

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