Question

In many cases the Coase theorem does not work well because

Select one:

a. there are too few parties at the negotiation table.

b. the government does not know about the Coase theorem.

c. transaction costs are too high.

d. transaction costs are too low.

Answer 1

Answer:-

Option C is correct which is 'transaction costs are too high'. Because Ronaldo Caose's work shows problem in applying the theorem and shows high transaction costs. It is costly to prevent many transactions that would carried out in which pricing system worked without cost. This theory is always not applicale in economic world because real transaction costs are low enough for efficient bargaining.

Option A is incorrect because it is not a reason of not working of Coase theorem. There are many parties available for bargaining.

Option B is incorrect because it is not a reason of not working of Coase theorem.

Option D is incorrect because transactions costs are not low. They are comparatively high in this theorem.