The economic explanation that is given by Nobel laureate economist Ronald Coase for why community property is polluted more often that private property is that
A)damaging community property indirectly affects individuals' wealth whereas damaging private property directly affects their wealth.
B)damaging private property indirectly affects individuals' wealth whereas damaging community property directly affects their wealth.
C)people are not made aware of their actions toward community property.
D)people ignore what is not right in front of them.

Question

Quizplus · Accepted Answer

Ronald Coase's theory, known as the Coase Theorem, suggests that when property rights are clearly defined and transaction costs are low, parties will negotiate to correct externalities such as pollution. The idea is that individuals have a direct incentive to take care of their private property because damage directly affects their wealth, whereas the effects of damaging community property are dispersed among many individuals, making the direct impact on any one person's wealth less noticeable. This leads to a situation where community property is more likely to be polluted because the individual does not bear the full cost of their actions.

The Economic Explanation That Is Given by Nobel Laureate Economist