Coase theorem part 2 says that:
A)economic decisions are made so that transaction costs are minimized.
B)transaction costs are zero.
C)economic activities are organized to maximize the gains from trade net of transaction costs.
D)private solutions will be found regardless of the level of transaction costs.

Question

Quizplus · Accepted Answer

Coase theorem part 2 states that economic activities will be organized to maximize the gains from trade net of transaction costs. This means that individuals will find the most efficient way to organize economic activities so as to maximize their gains from trade while minimizing transaction costs. Option A is incorrect because it does not capture the essence of the theorem; while transaction costs are a key factor, economic decisions are made to maximize gains. Option B is incorrect too, as transaction costs are unlikely to be zero in reality. Option D is incorrect because transaction costs are a critical factor in the theorem, therefore, private solutions are found taking into account transaction costs.

Coase Theorem Part 2 Says That