The Coase theorem states that when transaction costs are low and property rights are enforced,then:
A)bargaining between parties will never lead to an efficient outcome.
B)bargaining between parties will lead to an efficient outcome only if liability is placed on the party that is responsible for the externality.
C)bargaining between parties will lead to an efficient outcome only if the liability is placed on the people affected by the externality.
D)bargaining between parties will lead to an efficient outcome regardless of where liability is placed.

Question

Quizplus · Accepted Answer

The Coase theorem states that in a situation where property rights are well-defined and transaction costs are low, bargaining between parties will always result in an efficient outcome, regardless of where liability is placed. The parties involved will negotiate and arrive at the most mutually beneficial outcome without the need for government intervention.

The Coase Theorem States That When Transaction Costs Are Low