What is the Coase theorem? What conditions need to be present for this theorem to work?
What will be an ideal response?
The Coase theorem states that if property rights exist, only a small number of people are involved, and transactions costs are low, then private transactions are efficient and the outcome is not affected by who is assigned the property right.
The conditions that need to be present for the Coase theorem to work are:
• property rights exist;
• only a small number of people are involved;
• the transactions costs are low.
If these conditions are met, then the Coase theorem applies and there are no externalities.
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When the Fed conducts an open market sale, it
A) raises interest rates and increases the money supply. B) raises interest rates and reduces the money supply. C) lowers interest rates and reduces the money supply. D) lowers interest rates and increases the money supply.
Which of the following events occurred during the 2000 to 2003 time-frame and had an important impact on the deficit/surplus projections?
A. The decrease in unemployment rates from 2002 to 2003 B. The increase in inflation rates from 2000 to 2002 C. The recession of 2001 D. The increase in interest rates from 2001 to 2003