In which of the following situations would the Coase theorem more likely to be applied?
A) Two neighbors: a farmer and a beekeeper.
B) Highway drivers and the dwellers of neighborhoods crossed by the highway.
C) A railroad and its adjacent land owners.
D) None of the above.

Question

Quizplus · Accepted Answer

The Coase theorem is more likely to be applied in situations where there are a small number of parties involved, and property rights can be clearly defined and negotiated. The example of a farmer and a beekeeper fits this description well, as they can potentially negotiate over the effects of each other's activities directly.

In Which of the Following Situations Would the Coase Theorem