Which of the Following Correctly States the Coase Theorem

Multiple Choice

Which of the following correctly states the Coase theorem?

A) The outcome of a negotiation to resolve an externality will depend on the initial assignment of property rights.
B) Parties that are affected by an externality will bargain to reach an efficient outcome, even in the presence of positive transaction costs.
C) When two parties are affected by an externality, the party that caused the externality will pay the affected party the entire cost of the externality.
D) In the absence of property rights assigned to the affected parties, the efficient outcome will need to be negotiated by the government.
E) Bargaining between the affected parties will result in an efficient outcome, regardless of the property-rights assignment.