Suppose two neighbors share a park.One neighbor,Al,leaves trash in the park.This bothers the other neighbor,Bert.According to Coase's Theorem,the optimal level of trash in the park can be achieved if
A) someone is assigned property rights to the park.
B) government limits the use of the park.
C) nobody catches Al leaving the trash.
D) Bert moves.

Question

Quizplus · Accepted Answer

Coase's Theorem suggests that the optimal level of trash in the park can be achieved if property rights are assigned to the park. If Al is assigned property rights, he would have an incentive to keep the park clean to maintain its value. If Bert is assigned property rights, he could prevent Al from leaving trash in the park. Property rights create an incentive for individuals to take into account the costs and benefits of their actions, leading to mutually beneficial outcomes.

Suppose Two Neighbors Share a Park