Asked by Micah Jones on Apr 24, 2024
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The Coase theorem states that,in the presence of externalities,a market economy will:
A) always reach an efficient solution.
B) never reach an efficient solution.
C) reach an efficient solution if transaction costs are sufficiently low and property rights are well-defined.
D) reach an efficient solution only in the case of government regulation.
Coase Theorem
A principle suggesting that under certain conditions, when externalities are present, parties can negotiate agreements to allocate resources efficiently without government intervention, as long as property rights are clearly defined and transaction costs are low.
Externalities
Costs or benefits that affect parties who did not choose to incur those costs or benefits, often leading to market inefficiencies.
- Acquire knowledge about the Coase theorem and identify the necessary conditions for achieving efficiency in the presence of external factors.
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Learning Objectives
- Acquire knowledge about the Coase theorem and identify the necessary conditions for achieving efficiency in the presence of external factors.
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