Multiple Choice
Which of the following is not a way of dealing with externalities?
7. Externalities
Private Solutions to Externalities: The Coase Theorem
Struggling with Microeconomics?
Join thousands of students who trust us to help them ace their exams!Watch the first videoMultiple Choice
A key element of the Coase theorem is:
A
The ability to negotiate at a minimal cost
B
That externalities occur in the production and consumption of all products
C
That there are no efficient solutions to the problems caused by externalities
D
None of the above
Verified step by step guidance1
Identify the key concept of the Coase theorem, which is related to externalities and property rights.
Understand that the Coase theorem suggests that if property rights are well-defined and transaction costs are low, parties can negotiate to resolve externalities efficiently.
Recognize that the ability to negotiate at minimal cost is crucial for the Coase theorem to hold, as it allows parties to reach mutually beneficial agreements.
Consider the implications of the Coase theorem: it implies that under certain conditions, private bargaining can lead to efficient outcomes without government intervention.
Evaluate the options given in the problem and identify that the ability to negotiate at minimal cost aligns with the core principle of the Coase theorem.
Related Videos
Related Practice
Private Solutions to Externalities: The Coase Theorem practice set
Problem sets built by lead tutorsExpert video explanations