If transactions costs are low, then assigning property rights in a market with external costs i. increases the deadweight loss.
Ii. means private transactions are efficient.
Iii. means that only consumers must pay the external costs.

Question

Quizplus · Accepted Answer

If transaction costs are low, private transactions become efficient, which reduces deadweight loss due to external costs. However, assigning property rights may not necessarily mean that only consumers must pay the external costs. Therefore, option C (ii and iii) is incorrect, and options D and E (i and iii, and i and ii) are partially correct but do not offer the best choice as they include an incorrect statement. Therefore, the best choice is B (ii only).

If Transactions Costs Are Low, Then Assigning Property Rights in a Market