Question

The Coase Theorem suggests that private markets may not be able to solve the problem of externalitiesa. if the government does not become involved in the process. b. When the number of interested parties is very large and bargaining costs are relatively high c. if the firm in the market is a monopoly. d. if some people benefit from the externality.

Answer 1

Answer: B. When the number of interested parties is very large and bargaining costs are relatively high.

Explanation: The Coase Theorem is a legal and economical theory used to describe competitive markets. When the competitive markets are high, bargaining costs are high because each company is is fighting for use of the production and distribution channels. There are efficient input and output levels in a competitive market.