1. "When transaction costs are zero an efficient use of resources results from private bargaining, regardless of the legal assignment of property rights."

1. "When transaction costs are high enough to prevent bargaining, the efficient use of resources will depend on how property rights are assigned."

2. "The Nature of the Firm," said that if there is complete information and transaction is costless then there would be no efficiency-enhancing purpose to have a business firm. But transacting isn't costless and information isn't complete which is why business firms do exist.

2. One of the motivations for Coase to write his article was to provide a critique of Pigou's position "those who create externalities should pay through taxes or penalties or fines." You've likely learned about Pigouvian taxes-tax the creator of the externalities so that internalize the full costs and that will lead to efficient quantities of production.

2. Coase offered a different perspective-he considered externalities to be multilateral externalities. He suggested that in most externalities, each of the parties creates an externality on the other rather than it being a one-sided issue. This might be summarized as "it takes two to tango."

3. Like "The Nature of the Firm" the real point of Coase's paper was to point to an ideal and mostly imaginary world and consider how things would look and then to contrast that with the world as it is so that appropriate conclusion about how the real world works can be made. Somehow his point got lost in translation for many folks, which really disappointed Coase. a lot of people weren't getting the point at all!

4. Below find a statement made from the University of Chicago Law School regarding Coase's article 'The Problem of Social Cost.'

The Problem of Social Cost

"The influence of Ronald Coase's 1960 paper, "The Problem of Social Cost," cannot be overstated. Originally published in the Law School's own Journal of Law and Economics, of which Coase was editor from 1964 to 1982, the paper argues that in the absence of transaction costs, resources flow to their highest-valued use, regardless of the initial allocation of those resources. Nearly 30 years after its publication, Coase feared "The Problem of Social Cost" had been widely misunderstood. He wrote, "Its influence on economic analysis has been less beneficial than I had hoped."His aim, he said, was not simply to describe what life would be in a world without transaction costs, but rather, "to make clear the role which transaction costs do, and should, play in the fashioning of the institutions which make up the economic system." What has become known since as the "Coasean World,"--where rational actors transact freely without the need for institutions, firms, or even law-"is really the world of modern economic theory, one which was hoping to persuade economists to leave.'

Coase's theorem directs our attention to the real world to the world of messy transactions and choices constrained not just by individual budgets but by the design of the institutions in which those choices are made. Scholars are still grappling with the implications of "The Problem of Social Cost," the most-cited law review article in history, precisely because it requires us to deal with the world as it is, not as we wish it were.'

According to the information above, explain what is the Coase Theorem.