Coase made famous a court case between a doctor and a ...

[Metfan725]

Coase made famous a court case between a doctor and a confectioner. Suppose that exact case happened again and transactions costs were absent. When would we be sure that resources were inefficiently allocated?
 
  a. If the confectioner wins the property right to make his confections.
  b. If the doctor wins the right to prevent the confectioner from making his confections.
  c. Zoning laws are changed to prevent the confectioner from manufacturing in the current location.
   d. The judge forces the parties to bargain until they reach an agreement on who has a right to do what.

Question 2

A firm operating with diminishing total returns cannot be profit maximizing.
 
  What will be an ideal response?

[deja]

Answer to Question 1

c

Answer to Question 2

True. This firm could produce more output with fewer inputs. This cannot be profit maximizing.

[Metfan725]

Gracias!

[xthemafja]

TYSM