The Coase Theorem Implies That the Initial Allocation of Property

question 37

Multiple Choice

The Coase theorem implies that the initial allocation of property rights:

• A)determines all aspects of the final outcome of the negotiated agreement.
• B)does not determine which person will be entitled to engage in the externality generating activity, but does determine which person will receive compensation.
• C)determines which person will be entitled to engage in the externality generating activity, but does not affect which person will receive compensation.
• D)must be assigned to the person with the greatest costs.

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