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Based on your conversations today and your economics experience, you conclude that when externalities are present
The free market outcome is not efficient
Furthermore, you conclude that when there are negative externalities present, free markets
produce too much
When there are positive externalities present, free markets
produce to little
The Coase Theorem states that ___________
private bargaining will result in an efficient allocation of resources.
The Coase Theorem will will breakdown when ____________
- -When property rights are not clearly defined.
- -Transaction costs become high.
- - there are a large number of agents.
From an efficiency perspective, Jones ____ allowed to play his opera music.
According to the Coase Theorem ____ to compensate for the
jones will pay $0 to smith, negative externally
According to the Coase Theorem, _____ to compose for the ____
jones will pay $60 to smith, negative externality
The government could encourage the production of the efficient number of ITNs by ____________
providing a subsidy for ITNs.
This outcome ___ socially efficient
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