The Coase Theorem Asserts That, If Externalities Are Present and If

Multiple Choice

The Coase theorem asserts that, if externalities are present and if private parties can bargain over the allocation of resources at no cost, then

A) the private market will reach an equilibrium in which resources are allocated inefficiently.
B) the private market will reach an equilibrium in which resources are allocated efficiently.
C) the private market cannot reach an equilibrium.
D) a mixture of corrective taxes and subsidies is necessary for a socially optimal equilibrium.