CUET-PG 2023 Shift 1 Question 38: Market failure, externalities and public goods
Given below are two statements, one is labelled as Assertion (A) and the other is labelled as Reason (R):
Assertion (A): Coase theorem states that as long as property rights are defined and enforced, bargaining between parties can ensure an efficient outcome in the presence of externalities.
Reason (R): The assignment of property rights with bargaining among parties can resolve externality problems, when the number of parties involved is large.
In the light of the above statements, choose the most appropriate answer from the options given below:
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Answer and worked solution
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Market failure, externalities and public goods has come up 114 times in 7 exams since 2006.
What this question tests
This question is on Coase theorem and property rights, part of Market failure, externalities and public goods in Microeconomics.
How bargaining can fix an externality when property rights are clear and costs of bargaining are low.
TestStop has 15 past-paper questions on this subtopic.
