The Coase Theorem Works Best in Places That Transaction Costs

question 1

Multiple Choice

The Coase Theorem works best in places that transaction costs for contracts among people is low.Often in the world of torts and externalities both parties can claim that they have rights to impose on others.One case is that of a railroad that is noisy and scares the cattle and the rancher whose cattle sometimes wander in front of moving trains causing damage to them and the train.What does the Coase say would happen?

• A) The train should have property right to be safe from wandering cattle,and the rancher should be liable for train damage of rampaging cattle.
• B) The rancher should have the property right to be safe from noisy trains,and the railroad should be liable for weight loss of cattle from train whistles and rumbling noise.
• C) If transaction costs are low,the efficient activity will occur,either the rancher or railroad installing fences to protect from rampaging cattle and/or sound insulation with trees,or if it is cheaper,fewer train trips per day.The cheapest or most efficient solution will happen,regardless of who is assigned the original property right.

---

Definitions:

Selective Optimization

A strategy that involves focusing on and improving one's strengths while compensating for weaknesses, often used in the context of aging and development.

Compensation

Payment or reward typically given in exchange for services rendered or as reparation for loss.

Vowel Sounds

The sounds produced without any significant constriction or blockage of air flow in the vocal tract, fundamental to speech.

Fast Mapping

A cognitive process by which children are able to learn new words or concepts with minimal exposure, rapidly associating them with their meanings.