Anita enjoys growing flowers in her yard and has a lot of spare time,but she can't afford the $100 it costs to buy flower seeds,fertilizer,and water.Sally,who has a good view of Anita's yard,would also enjoy Anita's flowers.Sally has plenty of money but has no time to plant flowers.According to the Coase theorem,which of the following is most likely
A)The city government should give Anita the $100 needed to grow flowers.
B)The city government should require Anita to grow flowers.
C)Sally and Anita might both be better off if Sally gave $100 to Anita to plant flowers.
D)Sally and Anita would definitely both be better off if Sally gave $100 to Anita to plant flowers.

Question

Quizplus · Accepted Answer

The Coase theorem states that if property rights are clearly defined and transactions costs are low, then parties will negotiate and reach an efficient outcome regardless of the initial allocation of property rights. In this case, Anita and Sally could negotiate a deal where Sally provides the $100 needed for Anita to buy flower seeds, fertilizer, and water in exchange for Anita planting and maintaining the flowers. This would be a mutually beneficial exchange and both parties would be better off. The city government does not need to be involved in this transaction.

Anita Enjoys Growing Flowers in Her Yard and Has a Lot