Which of the following does not apply in the world of zero transaction costs?
A)Information is costly.
B)Coase theorem predicts a Pareto- optimal outcome.
C)Coase theorem predicts that allocation of resources is independent of property rights.
D)Property rights are perfectly defined.

Question

Quizplus · Accepted Answer

In a world of zero transaction costs, information would not be costly because the assumption of zero transaction costs implies that all relevant information can be obtained and transactions can be conducted without incurring any costs. The Coase theorem, which operates under the assumption of zero transaction costs, indeed predicts Pareto-optimal outcomes (B) and that the allocation of resources is independent of the initial distribution of property rights (C), assuming property rights are perfectly defined (D).

Which of the Following Does Not Apply in the World