A metal stamping factory moves next to a day care center.Noise from the factory makes it impossible for the kids to take a nap.Which of the following is likely to be true according to the Coase theorem?
A)The factory should move.
B)The day care center should move.
C)The factory should install sound insulation.
D)The day care center should install sound insulation.
E)An optimal solution cannot be achieved unless the costs are given.

Question

Quizplus · Accepted Answer

The Coase theorem suggests that as long as property rights are clearly defined and transaction costs are low, parties can negotiate a mutually beneficial solution regardless of who holds the rights. Without specific cost information, it's impossible to determine which solution is most efficient.

A Metal Stamping Factory Moves Next to a Day Care