In which of the following cases is the Coase theorem most likely to solve the externality?
A) Ed is allergic to his roommate's cat.
B) Chemicals from manufacturing plants in the Midwest are causing acid rain in Canadb.
C) Polluted water runoff from farms is making residents of a nearby town sick.
D) Industrialization around the world is causing global warming.

Question

Quizplus · Accepted Answer

The Coase theorem is most effective in situations where transaction costs are low and parties can negotiate directly, such as Ed negotiating with his roommate.

In Which of the Following Cases Is the Coase Theorem