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1. Describe the Coase theorem and explain why it is significant in the analysis of externatility...

1. Describe the Coase theorem and explain why it is significant in the analysis of externatility problems.

2. According to the Coase theorem, externalities

must usually be internalized by taxation or subsidy.
cannot be internalized if property rights are assigned.
are not relevant to the issue of market failure.
can be internalized by the market under certain conditions.
result when firms fail to maximize profits.

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