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please answer the following question. 1. Define the Coase Theorem. What are the reasons that the Coase Theorem might not be able to be applied?

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter1: What Economics Is About

Section: Chapter Questions

Problem 20QP

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1. Define the Coase Theorem. What are the reasons that the Coase Theorem might not be able to be applied?

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When Paul Samuelson switched from physics to economics, Robert Solow is said to have remarked that the average IQ in both disciplines went up. A bystander responded that Solow's claim must be wrong because it implies that the average IQ for academia as a whole (which is a weighted average of the average IQ levels for each discipline) must also have gone up as a result of the switch, which is clearly impossible. Was the bystander right? A) Yes. If the average in both disciplines goes up then the population average must also rise. B) No. There is not enough information about the average IQ for the population. C) Yes. The weights may change so that the population average also increases. D) No. If those in physics had IQs above average and those in economics has IQs below average, then the population average need not have changed.
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