Beth can earn $7,500 by renting out her house. However, her neighbor keeps a pet dog that chases away whoever comes looking for the house. Because her neighbor has a right to keep his pet untied, Beth is unable to find a tenant

What is the efficient outcome in this case if her neighbor values keeping his pet free for $1,500?


An efficient outcome in this case can be achieved if Beth strikes a private deal with her neighbor convincing him to keep his pet indoors. Because Beth can earn $7,500 by renting out her house and her neighbor values keeping her pet outdoors at $1,500, total well-being can be increased if Beth pays her neighbor an amount between $1,500 and $7,500 to keep his pet indoors.

Economics

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In determining the exchange rate between the Canadian dollar and British pound, if Canadian income increases, then

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