When property rights are assigned and transactions costs are low,
A) all costs and benefits are taken into account by the transacting parties so the transaction is efficient.
B) externalities will result in market failure.
C) the marginal social benefit curve shifts leftward and the marginal social cost curve does not shift.
D) the marginal social cost curve shifts rightward and the marginal social benefit curve does not shift.
E) the marginal social cost curve shifts rightward and the marginal social benefit curve also shifts rightward.

Question

Quizplus · Accepted Answer

When property rights are assigned and transactions costs are low, the transacting parties have an incentive to take into account all costs and benefits involved in the transaction. This creates an efficient outcome, where the marginal social benefit equals the marginal social cost. Thus, choice A is the best answer.

When Property Rights Are Assigned and Transactions Costs Are Low