Questions: According to the Coase theorem, private parties can A. solve positive externality problems more easily than negative externality problems. B. minimize transactions costs through private bargaining. C. solve externality problems through taxes. D. solve externality problems through private bargaining.

The answer is D. solve externality problems through private bargaining.

The Coase theorem does not specifically differentiate between positive and negative externalities in terms of ease of resolution. It focuses on the ability of private parties to negotiate solutions to externalities, regardless of whether they are positive or negative.

While the Coase theorem assumes that private bargaining can lead to efficient outcomes, it does not specifically state that transactions costs are minimized. In fact, the theorem assumes that transactions costs are zero or negligible for the bargaining to be efficient.

The Coase theorem does not involve taxes as a solution to externality problems. Instead, it suggests that private bargaining can lead to efficient outcomes without government intervention, provided that property rights are well-defined and transaction costs are low.

This is the correct interpretation of the Coase theorem. It posits that if property rights are clearly defined and transaction costs are low, private parties can negotiate solutions to externality problems on their own, leading to efficient outcomes.