Bob lives in a residential neighbourhood that takes pride on well-groomed lawns.Bob's neighbours find that the marginal benefit of someone else's well-groomed lawn is $10.Bob,however,receives the same net benefit from an unkempt lawn as a well-groomed lawn: zero (an unkempt lawn looks bad but costs nothing;a well groomed lawn looks nice but is costly).
-Refer to the information above.The Coase theorem suggests that

Question

Bob lives in a residential neighbourhood that takes pride on well-groomed lawns.Bob's neighbours find that the marginal benefit of someone else's well-groomed lawn is $10.Bob,however,receives the same net benefit from an unkempt lawn as a well-groomed lawn: zero (an unkempt lawn looks bad but costs nothing;a well groomed lawn looks nice but is costly). 
-Refer to the information above.The Coase theorem suggests that

Quizplus · Accepted Answer

According to the Coase theorem, if transaction costs are low and property rights are well defined, then the allocation of resources will be efficient, regardless of how the property rights are assigned. In this case, Bob's neighbours can negotiate with him to pay him to have a well-groomed lawn. Since Bob receives zero net benefit from grooming his lawn, he will be willing to do so as long as his neighbours' payments cover the cost. This would make Bob's neighbours better off (since they value well-groomed lawns more than the cost of payments), and Bob would also be better off (since he would receive compensation for the cost of grooming his lawn). Therefore, option C is the best choice. Options A and B are incorrect because they do not involve negotiation and do not consider Bob's preferences. Option D is incorrect because Bob and his neighbours would both be better off with the negotiated outcome. Option E is not relevant to the Coase theorem, as it is about Bob's personal valuation of a well-groomed lawn.

Bob Lives in a Residential Neighbourhood That Takes Pride on Well-Groomed