The Coase theorem states that if transactions costs are low, property rights are assigned, and parties understand how much they value something, private bargaining will result in an efficient solution to the problem of externalities. government intervention is always needed if externalities are present. a free market equilibrium is the best solution to address externalities. assigning property rights is the only thing the government should do in a market economy.

Answered: The Coase theorem states that if…

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter17: Externalities And The Environment

Section: Chapter Questions

Problem 6QFR

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The Coase theorem states that

		if transactions costs are low, property rights are assigned, and parties understand how much they value something, private bargaining will result in an efficient solution to the problem of externalities.
		government intervention is always needed if externalities are present.
		a free market equilibrium is the best solution to address externalities.
		assigning property rights is the only thing the government should do in a market economy.

Definition Video Formula Definition Phenomenon in which market supply and demand balance each other. Market equilibrium is the economic state in which the market demand curve intersects the market supply curve, giving us the equilibrium price and equilibrium quantity for which a commodity can be sold and purchased in an economy. When market equilibrium is achieved, it suggests that all resources have been allocated efficiently and that there is just a distribution of income and resources in the economy. Video Formula

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Coase theorem states that the ideal condition is that the involved party have the bargaining right which would reflect the full cost and as per the value of the property right, it would result in the most efficient outcome in the market.

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