Suppose two neighbors share a park.One neighbor,Al,leaves trash in the park.This bothers the other neighbor,Bert.According to Coase's Theorem,the optimal level of trash in the park can be achieved if
A) Al is fined by the government.
B) Al has the right to leave trash and Bert cannot do anything about it.
C) Al has the right to leave trash and Bert can pay him to limit his dumping.
D) Bert moves.

Question

Quizplus · Accepted Answer

Coase's Theorem suggests that the optimal outcome can be achieved through negotiation and bargaining between the two parties involved. In this case, Al has the right to leave trash in the park but Bert can offer to pay him to limit his dumping. This way, both parties can reach an agreement that is mutually beneficial and efficient. Option A involves government intervention which may not be necessary in this case, option B grants Al unrestricted rights to dump trash which is not conducive to optimal outcomes, and option D involves moving which may not be feasible or necessary.

Suppose Two Neighbors Share a Park