According to the Coase theorem, in order to solve a negative externality problem efficiently,
A)the property right must be assigned to the party with the least-cost alternative
B)the property right must be assigned to the victim of pollution
C)transaction costs must be high
D)transaction costs must be low
E)property rights must be determined by the courts

Question

Quizplus · Accepted Answer

According to the Coase theorem, if transaction costs are low, then bargaining and negotiations between affected parties can lead to an efficient outcome regardless of initial property rights. Therefore, assigning property rights is not necessarily the key to solving a negative externality problem efficiently, but rather reducing transaction costs is the crucial factor.

According to the Coase Theorem, in Order to Solve a Negative