The Coase theorem deals with the problem of pollution by
A) making all polluters stop polluting.
B) giving the government regulatory power over polluters.
C) having the government take over ownership of all polluting processes.
D) establishing and enforcing private property rights.
E) allowing the government to set the proper emissions charge.

Question

Quizplus · Accepted Answer

The Coase theorem assumes that property rights are well-defined and enforced. In this context, parties can negotiate and come to an efficient outcome. For example, if a factory pollutes a nearby river, the factory could negotiate with the affected residents to compensate them for the damage caused. Alternatively, the residents could negotiate to pay the factory to reduce its pollution. Ultimately, the goal is to encourage efficient and mutually beneficial negotiations that can reduce pollution without imposing excessive costs on any one party. This approach is consistent with establishing and enforcing private property rights.

The Coase Theorem Deals with the Problem of Pollution by