When one party suffers negative external effects due to the actions of another party, a lawsuit may not lead to the efficient outcome if:
A) property rights are not clearly assigned.
B) the parties have incomplete information.
C) the legal costs of the lawsuit are too high.
D) All of the above

Question

Quizplus · Accepted Answer

In order for a lawsuit to lead to an efficient outcome, property rights must be clearly assigned so that the parties know their respective rights and responsibilities. Additionally, the parties must have complete information about the costs and benefits of their actions. Finally, the legal costs of the lawsuit must not be prohibitively high, as this would discourage parties from pursuing legal action even in cases where it is warranted. If any of these conditions are not met, a lawsuit is unlikely to lead to an efficient outcome.

When One Party Suffers Negative External Effects Due to the Actions