Economics Questions- The Coase Theorem?

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3. According to the Coase Theorem, the private market can effectively deal with skyscraper externalities in New York City so long as:

I. Property rights to air space are clearly defined and enforced
II. Air space rights are distributed equally among all building owners
III. Transferring air space rights involves low transaction costs
IV. The City sets the price of air space rights

A. II, III, and IV only

B. II and IV only

C. I, II, III, and IV

D. I and III only

4. Which of the following is an advantage of having a market-determined price for air space rights in New York?


A. Air space rights will flow to those who value them most highly.

B. The market stops all development of the New York City skyline.

C. The market ensures low prices for air space rights.

D. The market fairly distributes an equal amount of air space rights to each land owner.
 
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