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The Coase Theorem Suggests That a Private Transaction Can Compensate

Question 24

Multiple Choice

The Coase theorem suggests that a private transaction can compensate for an externality when private property rights exist. In practice, why doesn't it work when large numbers of people are involved?


A) because marginal costs are higher than marginal benefits
B) because too many politicians get involved
C) because marginal benefits are higher than marginal costs
D) because transaction costs are too high

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