Question

Consider the following characteristics: a. low transactions costs b. small levels of pollution c. high levels of pollution d. clear assignment of property rights Which of the above are assumptions behind the Coase Theorem?
A.a, b, and d
B.a, c, and d
C.a and d
D.a only

Answer 1

Answer: Option (D)

Explanation:

From the given case/scenario, we can state that the correct options are a and d. In discipline such as economics and law, Coase theorem tends to describes or states the economic efficiency of the outcome or economic allocation in presence of the externalities. This theorem tends to states that under a trade in a given externality will be possible and thus there will be sufficiently low cost of transaction, and the bargaining will thus lead to Pareto efficient result regardless or irrespective of initial distribution of the property.