9. According to the Coase theorem, when negative externalities are present, a ma
ID: 1102364 • Letter: 9
Question
9. According to the Coase theorem, when negative externalities are present, a market will: a. reach an efficient solution only if the negative externalities are offset by positive externalities. b. reach an efficient solution if transaction costs are low and property rights are well-defined. c. reach an efficient solution only if the government intervenes in the market. d. always reach an efficient solution. 9. According to the Coase theorem, when negative externalities are present, a market will: a. reach an efficient solution only if the negative externalities are offset by positive externalities. b. reach an efficient solution if transaction costs are low and property rights are well-defined. c. reach an efficient solution only if the government intervenes in the market. d. always reach an efficient solution.Explanation / Answer
Answer
Option b
As per the Coase theorem, when negative externalities are present, a market will reach an efficient solution if transaction costs are low and property rights are well-defined.
If the transaction costs are low and the property rights are well defined then the market comes into the social efficient because of the laws.
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