According to the Coase theorem,the private market can achieve an efficient outcome:
A)as long as the enforcement of property rights costs less than the marginal benefit of emissions.
B)only if the property right to clean air is assigned to the polluter.
C)only if the property right to clean air is assigned to the party harmed by pollution.
D)if bargaining costs are low and property rights are well-defined.

Question

Quizplus · Accepted Answer

The Coase theorem suggests that private market can achieve efficient outcome provided that property rights are well-defined and bargaining costs are low. This means that if parties affected by pollution can negotiate and come to a mutually beneficial agreement, then the outcome can be efficient regardless of which party is assigned the property right to clean air. Therefore, option D is the correct choice. Option A is incorrect because it only considers the cost of enforcement of property rights and ignores the importance of well-defined property rights and bargaining costs. Option B and C are incorrect as they assume that assigning the property right to one party is necessary for achieving an efficient outcome. However, this may not always be the case as parties can negotiate and come to mutually beneficial outcomes regardless of initial property rights assignment.

According to the Coase Theorem,the Private Market Can Achieve an Efficient