Briefly explain the Coase Theorem. Suppose that the conditions for the Coase Theorem hold; that is, property rights for a resource are clearly established and bargaining costs are low. If so, what are the efficiency consequences if the government imposes a Pigouvian tax equal to the marginal external damage of production? Discuss.

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The Coase Theorem states that if property rights are welldefined and transaction costs costs of barg... View the full answer