Economics · Public Economics
Given below are two statements: Statement I: The Coase Theorem states that in the presence of externalities, efficient outcomes are achievable through private bargaining between affected parties, regardless of the initial assignment of property rights, as long as property rights are well-defined and transaction costs are zero. Statement II: The Coase Theorem implies that government intervention (e.g., Pigouvian taxes) is always unnecessary for correcting externalities, even when transaction costs are positive. Choose the correct answer:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Statement I is false, Statement II is true
- 2Statement I is true, Statement II is false✓
- 3Both statements are false
- 4Both statements are true
Correct answer
Statement I is true, Statement II is false
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