Multiple Choice
A chemical factory and a fishing club share a lake. Producing chemicals creates water pollution that harms the fish. Initially the lake is owned by no one. Keeping in mind the Coase theorem, suppose transactions costs are low and the chemical factory is given ownership of the lake. Compared to the situation with no property rights, the quantity of chemicals produced
A) will decrease.
B) will stay the same.
C) will increase.
D) changes, but the direction of the change is ambiguous.
Correct Answer:
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