According to Coase,
A)government regulation will almost always be necessary to eliminate negative externalities
B)externality problems can be solved efficiently by the assignment of property rights if transaction costs are low
C)when bargaining costs are high, it is necessary to assign property rights
D)assignment of property rights will lead to equitable but inefficient solutions to externality problems
E)there really is no externality problem with renewable resources

Question

Quizplus · Accepted Answer

Coase argued that if transaction costs are low (i.e. the costs of negotiating and enforcing contracts between affected parties), the assignment of property rights can lead to efficient solutions to externality problems without the need for government regulation. However, if bargaining costs are high, then assignment of property rights may be necessary to internalize the externalities. Coase did not claim that the assignment of property rights would always lead to equitable outcomes, but rather that it would lead to efficient outcomes. Additionally, Coase did not make any specific statement about renewable resources.