Question

Under certain conditions, the Coase theorem asserts that the property right to an activity will be acquired by the party that values it most. What are the two implications of the Coase theorem that are listed in the chapter? (Check only two.) A. Legal constraints will not affect the outcome. B. The outcome will result in the rights to an activity going to the party that deserves them the most C. The outcome will result in the largest possible economic pie for society to enjoy. D. Bargaining will be efficient since transactions costs are eliminated.

Answer 1

Answer:

The correct answers are the options:

B) The outcome will result in the rights to an activity going to the party that deserves them the most

D) Bargaining will be efficient since transactions costs are eliminated.

Explanation:

To begin with, the concept that is name as "Coase Theorem" is famously known in the microeconomics theory as the statement that describes the economic efficiency of an outcome that involves externalities. Moreover, it indicates that if a trade between two private parties is possible and the transactions costs are low, then it all will end up in a Pareto efficiency situation in where the party that it deserves the most will be benefit himself from that. However the theorem is just that, a theorem, it is very difficult to be applicable for the real life economics due to the fact that in real life the transactions costs are rarely low enough.