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April 19, 2014

Homework Help: Econ MC

Posted by Econ on Thursday, March 22, 2007 at 7:02pm.

Dick owns a dog whose barking annoys Dick's neighbor Jane. Suppose that the benefit of owning the dog is worth $700 to Dick and that Jane bears a cost of $500 from the barking. Assuming Dick has the legal right to keep the dog, a possible private solution to this problem is that

a. There is no private solution that would improve this situation.
b. Jane pays Dick $650 to get rid
of the dog.
c. Jane pays Dick $800 to get rid of the dog.
d. Dick pays Jane $600 for her
inconvenience.

-Can private solutions always be reached with the Coase Theroem?
-But in this case Dick has the legal rights, so does it mean he could chose not to pay Jane any money? so the answer would be A?

I agree, I too would go with a)

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