A metal-stamping factory moves next to a day care center. Noise from the factory makes it impossible for the kids to nap. It would cost the factory $5 million to move; it would cost $1 million for the day care center to move. Sound insulation for the factory costs $1 million; insulation for the day care center costs $200,000 . The court initially determines that the day care center has the
property right and orders the factory to purchase insulation for the day care. But on appeal the factory is awarded the property right. How would the optimal solution to this problem change after the appeals court decision?
a. The insulation would still be bought, but it would be bought by the day care center, a result consistent with the Coase theorem.
b. Insulation for the factory would be bought instead of insulation for the day care center, a result consistent with the Coase theorem.
c. Insulation for the day care center would still be bought, but it would be bought by the factory, a result consistent with the Coase theorem.
d. Insulation for the factory would be bought instead of insulation for the day care center, a result inconsistent with the Coase theorem.
e. The day care center would move instead of buying insulation, a result consistent with the Coase theorem.
A
You might also like to view...
The Uruguay Round was unsuccessful in its attempt to strengthen international protection of intellectual property rights
Indicate whether the statement is true or false
Human capital is knowledge in
A) books. B) people. C) firms. D) government.
Selling a good at a lower price in a foreign country than in the home country is an example of
a. an export subsidy. b. dumping. c. an export barrier. d. None of these.
Scarcity is caused by
A. a company's slow production speed. B. shortages. C. an individual's budget that is insufficient to cover the expenses of certain goods or services. D. unlimited wants running up against limited economic resources.