What economic argument suggests that if transactions costs are sufficiently low, the equilibrium is economically efficient regardless of how property rights are distributed?
A) the Coase theorem
B) the laws of supply and demand
C) the law of comparative advantage
D) the law of externalities

Question

Quizplus · Accepted Answer

The Coase theorem states that if transactions costs are sufficiently low, then the initial distribution of property rights does not matter because the involved parties will bargain and reach an economically efficient outcome regardless of how the rights are distributed. This is because in a world without transactions costs, the parties can communicate and bargain in a costless way, which allows them to internalize any externalities and reach the socially optimal outcome.

What Economic Argument Suggests That If Transactions Costs Are Sufficiently