If property rights are not clearly defined and enforced, then
A) some potential gains from specialization and trade are lost.
B) resources are devoted to protecting possessions rather than to production.
C) incentives for specialization based on comparative advantage are weakened.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

All three options mentioned in the answer choices are correct. If property rights are not clearly defined and enforced, it becomes difficult for individuals or firms to specialize based on comparative advantage. Moreover, the resources get diverted towards protecting possessions rather than productive activities that ultimately result in lower gains from trade. Therefore, it is essential to formulate a legal and institutional framework that protects property rights and safeguards private investments.

If Property Rights Are Not Clearly Defined and Enforced, Then