The Coase Theorem assumes
A) transactions are costless
B) damages are accessible and measureable
C) both (a) and (b)
D) none of the above

Question

Quizplus · Accepted Answer

The Coase Theorem assumes that transactions are costless and damages are accessible and measurable. This means that parties can negotiate and reach an efficient outcome without any transaction costs, and the damage caused by production can be quantified and compensated for. Both conditions are present in the graph as it represents the costs and benefits of producing the chemical solvents and the damage caused to the waterbody used for recreation, hence, C is the correct answer.

The Coase Theorem Assumes