A series of wind turbines are being constructed by the local electric company near the beach on Cape Cod. The Coase Theorem says that the conflict between the electric company and the local residents could best be resolved by:

Question

Federal legislation.

The local residents and the electric company.

The town governments on Cape Cod.

State legislation.

Answer 1

The Coase Theorem suggests that the conflict between the electric company and the local residents could best be resolved by the local residents and the electric company. According to the theorem, if property rights are clearly defined and transaction costs are low, parties can negotiate solutions to their conflicts without the need for government intervention or legislation. In this case, direct negotiation between the affected parties would likely lead to an efficient resolution.