Question

A Coase solution to a problem of externality ensures that a socially efficient outcome is to internalize the externality through taxes. internalize the externality through subsidies. maximize the joint welfare, irrespective of the right of ownership. stop production if there is any externality. invite other private partners to share the burden of externality.

Answer 1

Answer: Maximize joint welfare in respective or the right owner.

Explanation: A coase solution to a problem of externality insures that a socially efficient outcome is to maximize the joint welfare, irrespective of the right of ownership.

The Coase theorem states that when transaction cost are low, two parties will be able to bargain and reach an efficient outcome in the presence of an externality.