If property rights are very hard to assign and transactions costs are particularly high, then, given the Coase Theorem, externalities:

Question

Quizplus · Accepted Answer

The Coase Theorem indicates that efficient resource allocation can be achieved through bargaining and the assignment of property rights, but this assumes that property rights can be efficiently assigned and transactions costs are low. If property rights are difficult to assign and transaction costs are high, then it may not be possible to achieve an efficient allocation of resources, which would result in reduced efficiency due to externalities. Therefore, option A is the correct answer.

If Property Rights Are Very Hard to Assign and Transactions