Which of the following is an implication of the Coase Theorem?

Government intervention is not always necessary to solve externality problems.

Taxation leads to an efficient allocation of resources regardless of who holds the property rights.

Bargaining cannot lead to an efficient allocation of resources.

Negotiation leads to an efficient outcome if transaction costs are high.

Question

Rosemary Conley

Social Studies

17 July, 22:54

Which of the following is an implication of the Coase Theorem?

Government intervention is not always necessary to solve externality problems.

Taxation leads to an efficient allocation of resources regardless of who holds the property rights.

Bargaining cannot lead to an efficient allocation of resources.

Negotiation leads to an efficient outcome if transaction costs are high.

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Answers (1)

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Nicolas Gibbs · Answer 1

The correct answer is Government intervention is not always necessary to solve externality problems

The Coase Theorem says that, in an economic transaction with externalities, if property rights are well defined and if the transaction costs are low enough, then the private solution is socially optimal, with no need for government intervention to correct the situation. externality, which is a market failure. The government's only role would be to ensure that property rights are well defined and that free trade flows without transaction costs.