The Coase Theorem States That Social Efficiency Can Be Obtained

question 24

Multiple Choice

The Coase theorem states that social efficiency can be obtained through bargaining and

• A)gains to each party involved will be identical regardless of who has the rights
• B)net gains to each party depend on the initial allocation of property rights
• C)net gains accumulate to society, not individuals
• D)a socially efficient equilibrium offers no net gains because MAC will equal MD

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Definitions:

Productive Efficiency

A state where an economy or firm produces goods or services at the lowest possible cost, using all resources effectively.

Production Possibilities Curve

A graph that shows the various combinations of outputs that a society can produce given the available factors of production and technology.

Specialization

The process of focusing on a narrow area of expertise or production, enhancing efficiency and skill through the division of labor.

High Consumption-Low Investment

This term refers to an economic situation where a country or entity spends a significant portion of its income on consumption rather than investing in capital goods that could contribute to future growth.