According to the Coase theorem, if bargaining costs are small, then there will be an efficient solution to the problem of toxic waste
A)if the creator of the toxic waste is assigned the property rights
B)if the victim of toxic waste is assigned the property rights
C)regardless of which party is assigned the property rights
D)if the property rights are shared equally between the creator and the victim of toxic waste
E)in the form of a pollution tax

Question

Quizplus · Accepted Answer

According to the Coase theorem, if property rights are well defined and transaction costs are low, then the allocation of property rights will not affect the efficiency of the market outcome. In other words, if the parties can bargain at a low cost, they will reach an efficient solution regardless of who is assigned the property rights. Therefore, the best choice is C, regardless of which party is assigned the property rights.

According to the Coase Theorem, If Bargaining Costs Are Small