What is the Coase theorem? What conditions need to be present for ...

[rosent76]

What is the Coase theorem? What conditions need to be present for this theorem to work?
 
  What will be an ideal response?

Question 2

In a perfectly competitive market, because an individual seller tends to sell only a fraction of the total amount of the good produced:
 
  A) he can independently determine the market price.
  B) he can charge prices above the equilibrium price.
  C) his individual choices do not affect market outcomes.
  D) he always earns positive profit.

[shoemake]

Answer to Question 1

The Coase theorem states that if property rights exist, only a small number of people are involved, and transactions costs are low, then private transactions are efficient and the outcome is not affected by who is assigned the property right.
The conditions that need to be present for the Coase theorem to work are:
 property rights exist;
 only a small number of people are involved;
 the transactions costs are low.
If these conditions are met, then the Coase theorem applies and there are no externalities.

Answer to Question 2

C