Question

Consider a situation in which a utility company emits high levels of sulfur dioxide and the company is not liable for the damages its pollution causes. According to the Coase theorem, government action is _____________ to achieve an __________ amount of pollution.

a) necessary; equitable
b) necessary; efficient
c) not necessary; equitable
d) not necessary; efficient

Answer 1

d) not necessary; efficient

Step-by-step explanation:

Coase theorem focuses on mutual negotiation between the parties in conflict rather than involvement of the third parties that is government in order to increase any utility or services.

Although the pollution in the given instance shall not exceed the maximum acceptable level.

Thus, it shall be efficient amount of pollution.

In that case, no government shall regulate in between.