Question

Your value to live in a quiet apartment is $400. The neighbor living above your apartment makes noise using her treadmill every day. She values running at $500. Your neighbor has the right to run in her apartment. If the proper conditions are met, what does the Coase Theorem suggest is the likely outcome in this case

Answer 1

Answer:

continuation

Step-by-step explanation:

Since you value a quiet apartment at $400, which is less than $500, you might offer $400 for your neighbor to stop, but she values running higher, so she would likely refuse, resulting in the continuation of what's happening.

Answer 2

The correct statement to the given query is "The neighbor pays you $401 to continue running".

• Coase's theorem predicts that throughout the face of such an external cost, contracting groups or two entities would be prepared to arrange as well as achieve a satisfactory solution.
• Because of this, one's neighbor would then compensate them at minimum the worth of their condominium so that he would rather start operating upon the treadmills.

Learn more about Coase theorem here:

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