A Coase solution to a problem of externality ensures that a socially efficient outcome is to?

Question

internalize the externality through taxes.

internalize the externality through subsidies.

maximize the joint welfare, irrespective of the right of ownership.

stop production if there is any externality.

invite other private partners to share the burden of externality.

Answer 1

The Coase theorem says that the best way to take care of an externality is to create a market for it and let it go from there. With this in mind, the only one of these answers that really would fit at all is to invite other private partners to share the burden of the externality. This could be construed as creating a market for the externality.