Assuming that transaction costs are small, the Coase theorem is likely to be helpful in articulating a solution to:
A)a neighbourhood problem with unattended dogs running loose
B)a neighbour who doesn't care for his yard
C)a neighbour who deals drugs out of his house
D)all of the above issues

Question

Quizplus · Accepted Answer

The Coase theorem suggests that if property rights are well-defined and transaction costs are low, parties can negotiate solutions to externalities (such as nuisances or other disturbances) on their own, leading to an efficient allocation of resources regardless of the initial distribution of rights. All the given scenarios (unattended dogs, unkempt yards, and drug dealing) involve externalities that could potentially be resolved through negotiation or agreement between affected parties, according to the Coase theorem.

Assuming That Transaction Costs Are Small, the Coase Theorem Is