Question

There are two divorce laws, A and B. Under A, it takes only one person to agree to a divorce and the divorce is granted. Under B, it takes two persons to agree to a divorce before it is granted. According to Coase,a. there will be the same number of divorces under both laws if transaction costs are zerob. there will be more divorces under law Ac. there will be more divorces under law Bd. taxes should be imposed on those parties who seek divorcese. subsidies should be granted to those persons who unwillingly get divorces

Answer 1

The correct answer is A) there will be the same number of divorces under both laws if transaction costs are zero.

There are two divorce laws, A and B. Under A, it takes only one person to agree to a divorce and the divorce is granted. Under B, it takes two persons to agree to a divorce before it is granted. According to Coase, there will be the same number of divorces under both laws if transaction costs are zero.

Coase theorem establishes the economic efficiency of an outcome considering externalities or elements not previously considered. The theorem was created by Ronald Harry Coase, an English economist that won the Nobel Prize in Economics. Applied to divorce, the Coase theorem means that if a couple´s total surplus is more apart, that together, then with zero transactions costs the property rights do not change the outcomes, just the distribution.