The Coase theorem states that:
A)The initial allocation of property rights affects the final outcome achieved in the market.
B)Bargaining is difficult, given the high transaction costs typically involved.
C)Provided property rights have been assigned and transactions costs are low, the efficient outcome will be achieved regardless as to the initial allocation of property rights.
D)The initial allocation of property rights has no impact on the final outcome in market equilibrium, which is typically inefficient and results in a DWL.
E)None of the above.

Question

Quizplus · Accepted Answer

The Coase theorem posits that if property rights are clearly defined and transaction costs are minimal, parties will negotiate to correct any inefficiencies caused by externalities, leading to an efficient outcome regardless of the initial allocation of property rights.

The Coase Theorem States That