If transactions costs are low,then assigning property rights in a market with external costs
i.increases the deadweight loss.
ii.means private transactions are efficient.
iii.means that only consumers must pay the external costs.
A) i only
B) ii only
C) ii and iii
D) i and iii
E) i and ii

Question

Quizplus · Accepted Answer

When transactions costs are low, assigning property rights in a market with external costs would mean that private transactions are efficient. This is because it is easier for parties to negotiate and enforce voluntary agreements. However, assigning property rights does not necessarily mean that only consumers must pay the external costs, as the costs could still be shared among market participants depending on the specific circumstances. Therefore, option iii is not a correct choice. Additionally, assigning property rights in a market with external costs does not increase the deadweight loss, but rather reduces it as it can lead to more efficient use of resources. Therefore, option i is also not a correct choice.

If Transactions Costs Are Low,then Assigning Property Rights in a Market