Question

Alexander lives in an apartment building and gets a $250 benefit from playing his stereo. mary, who lives next door to alexander and often loses sleep due to the loud music coming from alexander's stereo, bears a $350 cost from the noise. mary would like to offer alexander some money to turn down the volume on his stereo. if mary had to hire a lawyer to draw up the contract, what is the maximum amount she could pay to the lawyer to ensure that both alexander and mary would benefit from the agreement?

Answer 1

Answer:

$100

Explanation:

The maximum amount Alexander benefits is $250

Mary's cost due to the noise is $350

The difference between Alexander's benefit and  Mary's cost due to inconvenience = $(350-250) = $100.

If Mary pays a legal fees of $100 to the lawyer , she will still have $250 to offer the maximum benefit to Alexander to reduce the noise .

She might still be able to negotiate a reduction in the payment made to Alexander and also make some gain.

Any attempt  to pay more than $100 for legal fees means that the arrangement will not be beneficial to Mary if Alexander demands for the maximum benefit.

Answer 2

Answer: The answer is $100

Explanation: This is because the difference between Alexander's benefit and  Mary's cost due to inconvenience is:

$350 - $250 = $100.

The maximum amount Alexander could benefit from Mary is $250. This is because, If Mary pays legal fees of $100 to the lawyer, she will still have $250 to offer the maximum benefit to Alexander to reduce the noise.

However, she might still be able to create a bargain in which she will ask for a reduction in the payment made to Alexander so that she can also make some gain.

If Alexander demands for anything above $100 in trying to push for his maximum benefit, Mary will not be able to make any gain.