According to the Coase Theorem
A) efficiency can result only if producers hold the property rights
B) an efficient outcome is possible as long as property rights are assigned
C) efficiency is not possible in the presence of an environmental externality
D) none of the above

Question

Quizplus · Accepted Answer

The Coase Theorem suggests that an efficient outcome can be reached as long as property rights are assigned and transaction costs are low. In this case, the graph shows that as the cost of pollution increases, the market quantity of solvents decreases. This suggests that the market can reach an efficient outcome as long as property rights are assigned and the cost of pollution is accurately reflected in the market price of the solvents.