How can Coase theorem be used to resolve negative externalities and improve efficiency? Explain clearly.

Expert Solution

According to “Coase Theorem” if property rights are specified properly with no transactions costs then socially optimum and efficient level of output can be produced by mutual agreement between two parties.

Consider an example there are two individuals one is “fisher man” and the other one is a “Firm owner” and the property right is assigned to the “fisher man”. So as the “firm owner” will produce goods and will emit pollutants into the river, it is adversely effects the “fisher man” as the harmful pollutants decrease the availability of fishes into the river. So, here “firm owner” is creating negative externality to the “fisher man”.

So, here the efficient as well as the socially optimum output production is below the current level of production. So, since here the property right is assigned to the “fisher man”, => the fisher man can charge a fixed fee equal to the “marginal damage” per unit of pollutant released. So, if the “fisher man” does these, => the producer will reduce the production as well as the level pollutant emission into the river and the socially optimum level of output will be produced.

Rahul Sunny answered 1 year ago

Why would someone use the Coase Theorem to minimize the impact of externalities?

In the movie "Poisoned Waters" what are some externalities and coase theorem that took place?

True or False: The Coase theorem says that in the case of externalities, allocating property rights...

True or False: The Coase theorem says that in the case of externalities, allocating property rights of the externality always makes consumers and producers better off.

Briefly explain the limitations of the Coase Theorem.

What kind of policies can be used to deal with negative externalities? For each policy explain...

What kind of policies can be used to deal with negative externalities? For each policy explain the downsides.

Write a short essay on externalities and the so-called Coase theorem. As part of your answer...

Write a short essay on externalities and the so-called Coase theorem. As part of your answer make sure that you discuss the circumstances under which private markets are most likely to come up with effective private solutions to the problem of externalities. In that context make sure to include at least one specific instance of a situation in which an effective market solution is feasible and also at least one example of a situation in which a private market solution...

Describe a negative externality that may (in theory) be solved by applying the Coase Theorem. a....

Describe a negative externality that may (in theory) be solved by applying the Coase Theorem. a. Explain what the Coase Theorem states and how it would be applied. b. Discuss 2-3 reasons why applying the Coase Theorem would be difficult in practice. Explain within the context of your example if possible or use a more general example.

Explain using an example how the Coase Theorem states that by properly assigning property rights will...

Explain using an example how the Coase Theorem states that by properly assigning property rights will result in an efficient outcome (HINT: I highly recommend that you use a diagram to help explain your answer). What are the two assumptions needed for the Coase theorem to hold?

Consider how Coase Theorem can be applied to the following scenarios. Specifically, think about the following...

Consider how Coase Theorem can be applied to the following scenarios. Specifically, think about the following issues for each of the scenarios: 15 Marks (i) Are property rights well defined? (ii) Will trading take place? (iii) Are any of the key assumptions within Coase Theorem likely to be violated in any way? a. A chicken farming factory has opened in industrial Unanderra. The factory produces a foul smell that settles over the center of Unanderra as well as increased traffic...

1. Consider how Coase Theorem can be applied to the following scenarios. Specifically, think about the...

1. Consider how Coase Theorem can be applied to the following scenarios. Specifically, think about the following issues for each of the scenarios: (i) Are property rights well defined? (ii) Will trading take place? (iii) Are any of the key assumptions within Coase Theorem likely to be violated in any way? a. A chicken farming factory has opened in industrial Unanderra. The factory produces a foul smell that settles over the center of Unanderra as well as increased traffic to...

Question