(Consider This) Suppose that a large tree on Betty's property is blocking Chuck's view of the lake below. Betty accepts Chuck's offer to pay Betty $100 for the right to cut down the tree. This situation
Describes
A) the Coase theorem.
B) the optimal allocation of a social good.
C) a positive externality.
D) a market for externality rights.

Question

Quizplus · Accepted Answer

The Coase theorem suggests that if property rights are well-defined and transaction costs are low, parties can negotiate to resolve externalities on their own, as seen in Betty and Chuck's agreement.

(Consider This) Suppose That a Large Tree on Betty's Property