Tudent Version - Tutorial 5
Tudent Version - Tutorial 5
Tudent Version - Tutorial 5
Soundproofed
$100/month
$120/month
Not soundproofed
$150/month
$80/month
(a)
If Barton has the legal right to make any amount of noise he wants and
he and Statler can negotiate with one another at no cost, will Barton install and
maintain soundproofing? Explain. Is his choice socially efficient?
(b)
If Statler has the legal right to peace and quiet and can negotiate with
Barton at no cost, will Barton install and maintain soundproofing? Explain. Is
his choice socially efficient?
(c)
Does the attainment of an efficient outcome depend on whether Barton
has the legal right to make noise, or Statler the legal right to peace and quiet?
Question 3
Consider the market for fire extinguishers.
(a)
If homeowners in housing flats own fire extinguishers, why might this
exhibit positive externalities? Draw a graph of the market for fire