Assume that your roommate is very messy. Suppose she gets a $25 benefit from being messy but imposes a $50 cost on you. The Coase theorem would suggest that an efficient solution would be for you to
A)pay your roommate at least $25 but no more than $50 to clean up after herself.
B)pay your roommate at least $51 to clean up after herself.
C)charge your roommate at least $25 to have you clean up after her.
D)charge your roommate at least $50 but no more than $100 to keep you from complaining about the mess.

Question

Quizplus · Accepted Answer

The Coase theorem suggests that when there are property rights and low transaction costs, parties will negotiate to an efficient solution regardless of who initially holds the property rights. In this case, the roommate's benefit from being messy ($25) is less than the cost she imposes on you ($50), meaning that if you were to offer to pay her at least $25 but no more than $50 to clean up after herself, she would accept because she would be better off receiving the payment instead of being messy. This solution is efficient because both parties are better off than they were before.

Assume That Your Roommate Is Very Messy