According to the Coase theorem, externalities a. must usually be internalized by taxation or subsidy. b....
According to the Coase theorem, externalities
a. must usually be internalized by taxation or subsidy.
b. can be internalized by the market under certain conditions.
c. result when firms fail to maximize profits.
d. cannot be internalized if property rights are assigned.
e. are not relevant to the issue of market failure.
Homework Answers
Answer is (d) externality cannot be internalized when property rights are assigned.
According to Coase theorem, it says that when there is externality and absence of transaction costs, bargaining can achieve the efficient outcomes but only when there is no property rights assigned.
But when there are property rights assigned, then the externality cannot be internalized.
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According to the Coase theorem, externalities
a. must usually be internalized by taxation or subsidy.
b....
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