Author Question: The Coase Theorem states that externalities can always be eliminated by the market as long as ... (Read 65 times)

swpotter12 · **on:** Jun 29, 2018

The Coase Theorem states that externalities can always be eliminated by the market as long as property rights exist, the number of parties involved is small, and transactions costs are low.

Indicate whether the statement is true or false

Question 2

Comment on the following statement: Average fixed cost falls as output rises, but average fixed cost will never be equal to zero.

What will be an ideal response?

epscape · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

TRUE

Answer to Question 2

The statement is true. Because average fixed cost is equal to fixed cost divided by the number of units of output, average fixed cost declines as output rises. However, as long as fixed cost is not equal to zero, average fixed cost cannot be equal to zero.