According to the Coase Theorem, involved parties should generally be able to negotiate solutions without any form of government intervention if which of the following is true?
Explanation
Answer - D - According to the Coase Theorem, involved parties should generally be able to negotiate solutions without any form of government intervention if only a small number of people are concerned, the costs of bargaining are negligible, and property rights are very clear.
Key Takeaway: The Coase Theorem has to do with property rights. According to the theorem, if only a small number of people are involved, the costs of bargaining are negligible, and property rights are very clear, the involved parties should generally be able to negotiate the solution without government intervention. Keep in mind, however, that the Coase Theorem and lawsuits cannot and do not resolve all situations with externalities. There are many cases in which large numbers of people can be affected and the spillover costs inhibit creating solutions without help from the government.
