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Peter studies at the coffee shop around the corner, at the same time that John talks loudl

Peter studies at the coffee shop around the corner, at the same time that John talks loudly on his mobile phone. Each call that John makes costs Peter the equivalent of €10 in annoyance. John gets a pleasure of €25 from the first call he makes, €15 from the second call, €5 for the third call, €3 from the fourth call. If the both Peter and John could negotiate a settlement without transactions costs, how many phone calls would John end up making if he (John) had the rights to make any calls he liked at the coffee shop?

A. 2

B. 0

C. 1

D. 3

2.Peter studies at the coffee shop around the corner, at the same time that John talks loudly on his mobile phone. Each call that John makes costs Peter the equivalent of €10 in annoyance. John gets a pleasure of €25 from the first call he makes, €15 from the second call, €5 for the third call, €3 from the fourth call. If the both Peter and John could negotiate a settlement without transactions costs, how many phone calls would John end up making if Peter had the rights to stop any phone calls from taking place at the coffee shop?

A. 2

B. 0

C. 1

D. 3

3.Peter studies at the coffee shop around the corner, at the same time that John talks loudly on his mobile phone. Each call that John makes costs Peter the equivalent of €10 in annoyance. John gets a pleasure of €25 from the first call he makes, €15 from the second call, €5 for the third call, €3 from the fourth call. If both Peter and John could negotiate a settlement, but the cost of making a transaction for Peter were €6 (he is very shy and does not like to talk to strangers), how many phone calls would John end up making if he (John) had the rights to make any phone calls he likes at the coffee shop?

A. 2

B. 0

C. 1

D. 3

4.According to the Coase theorem, when the parties affected by externalities can negotiate costlessly with one another:

A. an efficient outcome results if the liability is placed on the party with the lowest cost of prevention

B. an efficient outcome results no matter how the law assigns responsibility

C. efficiency cannot be reached without government intervention

D. the correct way to deal with an externality is to tax it

5.If the costs of negotiation are small but not negligible:

A. an efficient outcome results if the liability is placed on the party with the lowest cost of prevention

B. an efficient outcome results no matter how the law assigns responsibility

C. efficiency cannot be reached without government intervention

D. the correct way to deal with an externality is to tax it

6.Joe plays his stereo loud; this bothers Harry. According to the Coase theorem:

A. the police should tell Joe to turn down his stereo

B. Harry should pay Joe to turn down his stereo

C. Joe should pay Harry to turn down his stereo

D. Joe and Harry should be able to work out an agreement between themselves

7.If a company dumps pollution in the water and if transactions costs are high:

A. all parties connected with the pollution should negotiate

B. the company should be liable

C. the company should be allowed to pollute

D. the company should go out of business

8.Negative externality occurs when:

A. the production of a good harms third parties

B. the production of a good helps third parties

C. a buyer is sold inferior and damaged merchandise

D. the consumption of a good helps third parties

9.An example of a positive externality is:

A. pollution

B. an apple orchard increasing the number of trees next to a bee farm

C. the Clean Air Act

D. smoking in a crowded place

10.Suppose the problem is the stereo noise in the dorm. The marginal benefit of the noise for those who like hearing the music is MB = 10 - V where V is the volume. The marginal cost to those who are trying to sleep is MC = V. If negotiation costs are zero and those trying to sleep have the property rights to the airwaves, how loud will the music be played?

A. 3

B. 4

C. 5

D. 10

Dec 14 2019 View more View Less