Ty Lives in an Apartment Building and Gets a Benefit

question 316

Multiple Choice

Ty lives in an apartment building and gets a benefit from playing his stereo. Olivia, who lives next door to Ty and often loses sleep due to the loud music coming from Ty's stereo, bears a cost from the noise. Olivia is threatening to call the police to force Ty to turn down his stereo. Under which of the following conditions would Ty be able to offer Olivia some amount of money to keep her from calling the police and to allow him to continue to play his stereo loudly?

• A)The cost of the noise to Olivia must exceed the benefit of the music to Ty.
• B)The benefit of the music to Ty must exceed the cost of the noise to Olivia.
• C)The Coase Theorem guarantees that Olivia and Ty will always be able to come to an agreement that keeps Olivia from calling the police regardless of the individual benefits and costs.
• D)The cost of the noise to Olivia must exceed the benefit of the music to Ty by an amount greater than the transaction costs associated with the agreement.

---

Definitions:

Influenced

The capacity of a person, object, or idea to have an effect on others or the environment, often without direct or physical presence.

Jungian Theory

A psychological theory developed by Carl Jung that emphasizes the collective unconscious, archetypes, and the process of individuation.

Experiences

Events or occurrences that leave an impression on someone, contributing to one's knowledge or consciousness.

Evidence

Information or facts that are used to support the validity of an argument or hypothesis.