Asked by Yessenia Castro on Apr 27, 2024
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According to the Coase theorem, the private market will need government intervention in order to reach an efficient outcome.
Coase Theorem
A principle that asserts that when trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property.
Government Intervention
The involvement of the government in the market, aiming to alter the allocation of resources and distribution of goods and services.
Efficient Outcome
An economic situation in which all resources are allocated in the most effective way possible, maximizing potential benefit.
- Fathom the employment and ramifications of the Coase theorem in tackling externalities.
- Comprehend the function of government action in dealing with externalities and advancing social welfare.
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Learning Objectives
- Fathom the employment and ramifications of the Coase theorem in tackling externalities.
- Comprehend the function of government action in dealing with externalities and advancing social welfare.
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