When property rights are assigned and transactions costs are low,
A) the marginal social cost curve shifts rightward.
B) the marginal social benefit curve shifts leftward.
C) all costs and benefits are taken into account by the transacting parties so the transaction is efficient.
D) externalities will lead to market failure.

Question

Quizplus · Accepted Answer

When property rights are clearly assigned and transaction costs are low, all costs and benefits are considered by the parties involved in a transaction, leading to efficient outcomes where resources are allocated optimally according to market forces. This is in line with the Coase Theorem, which suggests that under such conditions, parties can negotiate to correct for externalities and achieve efficiency.

When Property Rights Are Assigned and Transactions Costs Are Low