A Meditation Class Meets on the Second Floor of a Building;

question 114

Multiple Choice

A meditation class meets on the second floor of a building; the first floor is a nightclub.The loud music from the club disturbs the classes.The club could be soundproofed for a cost of $5, 000 or move at a cost of $8, 000.The class can't soundproof enough to overcome the music, but could be moved for $4, 000.According to Coase,

• A)the club should be soundproofed so both businesses can stay open
• B)the club should be soundproofed because it is the one generating the externality
• C)the club should move rather than be soundproofed because eliminating an externality is better than compensating for it
• D)the class should move because it can eliminate the externality at a lower cost than can the nightclub
• E)whichever business has been there longer has the overriding property right; the other should adjust