The Coase theorem applies when property rights are given
A) to the polluter but not to the victim.
B) to the victim of pollution but not to the polluter.
C) to either the polluter or the victim.
D) neither to the polluter nor to the victim.

Question

Quizplus · Accepted Answer

The Coase theorem posits that if property rights are well-defined and transaction costs are negligible, externalities (like pollution) can be efficiently resolved through bargaining, regardless of who holds the rights. This means the theorem applies whether rights are assigned to the polluter or the victim.

The Coase Theorem Applies When Property Rights Are Given