Explanation Option (c): The Coase theorem states that the proportion that the private parties can bargain without cost over the resources’ allocation can solve the problems in their own way. Sometimes, the interested parties or private parties fail to solve the problem of externality. This is because of the problem of transaction cost. The Coase theorem is not applicable if transaction costs make negotiating difficult. Thus, option “c” is correct. Option (a): The Coase theorem is applicable if there is a significant externality between two parties. In the Coase theorem, the proportion that the private parties can bargain without cost over the resources’ allocation can solve the problems in their own way...