Question

can coase theorem apply in the situation of positive externality ? if yes , give 2 examples of it .

can coase theorem apply in the situation of positive externality ? If yes, give 2 examples of how coase theorem solves the problem in such situation

Answer 1

Yes, Coase theoram can be applied in the situation of positive externality.

example:1. If a household has green lawn which produces positive externality on the neighbour as it increases beautification of house and improves the air quality of the surrounding, but the neighbour doesnt not pay to maintain the green lawn and garden.

2. If a firm set up its production unit in a remote area, it has positive impact on surroundings as the firm invests on infrastructure buliding such has road, electricity, water supply, etc. It will further attract investment which provide economic incentives to the local population like employment, social infrastructure which positively affect the lives of people living near the production unit for which the local population don't pay any amount.