A stamp making factory is set up next to a high school. Noise from the factory makes it difficult for the kids to focus on the lessons taught. It would cost $6 million for the factory to move and $2 million for the school to move. Sound insulation for the factory would cost $1 million, while insulation for the school would cost $200,000 . According to the court, the school has the property right
Which of the following solutions is consistent with the Coase theorem?
a. The factory should install sound insulation because that is cheaper than moving.
b. The factory should pay for the relocation of the school.
c. The factory should buy insulation for the school.
d. The school should buy its own insulation.
c
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What will be an ideal response?
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