Question 8 1 pts The Coase Theorem states that two criteria are necessary for af

Question

Question 8 1 pts The Coase Theorem states that two criteria are necessary for affected parties to correct market failures themselves through bargaining: 1. clearly defined property rights and 2. low transactions costs. Which of the following is an example of "transactions costs" as defined by economists? O The costs of gathering those who are negatively affected by a market and bargaining with the polluter @ The cost of purchasing an item in a market O The cost of the negative externality The costs of both the item and the negative externality together

Explanation / Answer

Transaction costs in economics can be defibned as any costs incurred while entering into a trade contract or an agreement. Thus, the transaction costs in Coase Theorem are the costs incurred while getting all parties that are affected by the negative externality together and bargain with the party that has been creating a negative externality for them.

All the costs and time spent constitute the 'transaction cost'.

Thus, the correct answer is option a. The costs of gathering those who are negativelt affected by the market and bargaining with the polluter.

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