Suppose that a large tree on Shawn's property is blocking Sam's view of the lake below.Shawn accepts Sam's offer to pay Shawn $100 for the right to cut down the tree.This situation describes:
A)the Coase Theorem.
B)the diamond-water paradox.
C)logrolling.
D)a market for externality rights.

Question

Quizplus · Accepted Answer

The Coase Theorem suggests that if property rights are well-defined and transaction costs are low, parties can negotiate to resolve externalities on their own. In this case, Sam and Shawn negotiate a payment for the right to cut down the tree, resolving the externality of the blocked view.

Suppose That a Large Tree on Shawn's Property Is Blocking