You accidentally run into your next door neighbor's fence and destroy it. Your neighbor sues you and you are required to pay $1,000 to repair the fence. This is an example of
A) the Coase theorem.
B) a liability rule.
C) an injunction.
D) the free-rider problem.

Question

Quizplus · Accepted Answer

This is an example of a liability rule, where the party responsible for the damage (in this case, you) is required to compensate the affected party (your neighbor) for the loss or damage caused (the destroyed fence).

You Accidentally Run into Your Next Door Neighbor's Fence and Destroy