According to the Coase theorem, under what condition can private individuals effectively resolve externality issues?

Show Answers

When transaction costs are absent.When all parties involved possess equal bargaining power.When the affected party initially holds the property rights to be free from interference.When numerous parties are impacted by the externality.When the government mandates negotiation among the parties.

Explanation

The Coase theorem states that private parties can efficiently address externalities if there are no transaction costs involved. This allows them to negotiate and reach mutually beneficial agreements without external intervention. Factors such as equal bargaining power, initial property rights, the number of affected parties, or government enforcement are not necessary conditions for this outcome.