The Coase theorem will hold only if:
A) people can make enforceable agreements.
B) there are no transactions costs.
C) Both of these must hold true.
D) Neither of these must hold true.

Question

Quizplus · Accepted Answer

The Coase theorem states that in the absence of transaction costs, if property rights are well-defined and people can make enforceable agreements, then resources will be allocated efficiently regardless of how property rights are initially assigned. Therefore, both conditions of enforceable agreements and no transaction costs must hold true for the Coase theorem to be valid.

The Coase Theorem Will Hold Only If