What does the Coase theorem propose?

Show Answers

Public goods ought to be supplied until the marginal social benefit equals the marginal production cost.Given specific circumstances, private individuals can negotiate to reach an efficient outcome without government interference.The private market will be unable to supply the optimal quantity of a public good due to the free-rider issue.Government intervention is necessary to correct production when external costs are present, ensuring efficient output levels.

Explanation

The Coase theorem suggests that when certain conditions are met, private parties can negotiate solutions that lead to efficient resource allocation without the need for government action.