A Dentist Shares an Office Building with a Radio Station

question 102

Multiple Choice

A dentist shares an office building with a radio station. The electrical current from the dentist's drill causes static in the radio broadcast, causing the radio station to lose $10,000 in profits. The radio station could put up a shield at a cost of $30,000; the dentist could buy a new drill that causes less interference for $6,000. Either would restore the radio station's lost profits. What is the economically efficient outcome?

• A)The radio station puts up a shield, which it pays for.
• B)The radio station puts up a shield, which the dentist pays for.
• C)Neither the radio station nor the dentist purchase additional equipment.
• D)The dentist gets a new drill; it does not matter who pays for it.

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Definitions:

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