Which of the following statements regarding Coase\'s Theorem is most likely to b

Question

Which of the following statements regarding Coase's Theorem is most likely to be true? Lowering transaction costs may be a preferred strategy for government intervention relative to other Pigouvian instruments such as an emissions tax when the parties affected by the externality are few. O There is no need for the government to address harmful emissions related to driving since breathers should be able to negotiate directly with drivers to address them. If transaction costs exceed the gap between parties' willingness to pay and willingness to accept, then private negotiation will achieve the Pareto optimal allocation. 0 Suppose Coase's Theorem holds. The allotment of property rights to affected parties will affect the likelihood that the Pareto optimal allocation is achieved by private negotiation, but will have no bearing on the distribution of benefits across affected parties.

Explanation / Answer

The correct option is D because this may happen only if the no of parties involved are few then private negotiation will bring out the efficient result like in the case of an accident where the injure pays for the victims loss when he is guilty.

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