What do you mean by Coase theorem?
What will be an ideal response?
Coase theorem suggests that, with low transaction costs and well-defined property rights, the market mechanism can take care of the problem and even obtain an optimal outcome by negotiation between the individuals who produce the externalities and the individuals who are affected by them if property rights are well defined. It adds that no matter which of the two parties has the upper hand, the outcome of the negotiation will be the same. However, because transaction costs are high and property rights are not well-defined in many cases of externalities, negotiations in the competitive market often fail to resolve externalities.
You might also like to view...
The world of flexible exchange rates and perfect capital mobility is often called the
A) Keynesian model. B) Mundell-Fleming model. C) Monetarist model. D) Melvin model.
A monopolized market is characterized by:
a. a sole seller of a product for which there are few suitable substitutes. b. very strong barriers to entry. c. a single firm facing the market demand curve. d. all of these.
Real GDP is:
A. calculated based on goods and services valued at constant prices. B. calculated based on goods and services valued at current prices (current at the time of production). C. useful in clearly seeing changes in prices over time using GDP. D. the actual GDP that is created in the economy when we consider all items purchased.
ALL of the following describe economic conditions during the Great Depression in the United States EXCEPT:
A. high rates of unemployment. B. high rates of inflation. C. a sharp decline in stock prices. D. low levels of production.