Suppose twenty neighbors share a park.One of the neighbors,Al,leaves trash in the park.This bothers the other neighbors.According to Coase's Theorem,assigning the property rights to the park to Al
A) will achieve the socially optimal quantity of trash.
B) will result in zero trash being dumped in the park.
C) might still not achieve the social optimum since coordinating the other nineteen neighbors can be costly.
D) is unfair.

Question

Quizplus · Accepted Answer

Coase's Theorem states that if property rights are clearly defined and transaction costs are low, then bargaining between parties will lead to efficient outcomes, regardless of initial property rights allocation. However, in this scenario, coordinating the other nineteen neighbors may involve high transaction costs, which could prevent the efficient allocation of property rights and lead to suboptimal outcomes. Thus, assigning property rights to Al may not necessarily achieve the social optimum, making option C the best choice.

Suppose Twenty Neighbors Share a Park