Which of the following statements describes the Coase Theorem? a,Even if bargaining is not costless, and...

Which of the following statements describes the Coase Theorem?

a,Even if bargaining is not costless, and property rights are unclear, externality problems can be solved through private bargaining.

b,If the marginal benefit of a good exceeds the good's marginal cost, more of it should be produced.

c,If bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining.

d,Elimination of an externality is possible only when the marginal benefit of a good is no higher than its marginal cost.

Expert Solution

Coase theorem states that private parties can negotiate a solution for an externality problem through bargaining if the property rights are well established and defined. However, there should be no transaction cost to be incurred to undertake such negotiations.

So, Coase theorem suggests that if bargaining is costless, and property rights are clearly established and enforced, then externality problems can be solved through private bargaining.

Hence, the correct answer is the option (c).

Rahul Sunny answered 2 years ago

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