Hamid and Lee Are Neighbors

question 25

Multiple Choice

Hamid and Lee are neighbors. Hamid has a barking dog that he keeps in his backyard for property protection; he values the dog at $600. Lee despises the constant barking, because it costs him $800 in lost sleep. Assume Hamid has a legal right to own a barking dog. Because Hamid speaks Farsi and Lee speaks Korean, they need an interpreter to handle negotiations regarding the dog. There ____ a Coase solution to this problem if the interpreter costs $250 and ____.

• A) is; Hamid pays Lee
• B) is; Lee pays Hamid
• C) is not; neither person pays the other
• D) is; neither person pays the other

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Definitions:

Dishonors

Refers to the failure to accept or pay a bill of exchange or promissory note when due.

Dishonored Note

A promissory note that has not been paid by the maker at maturity.

Maturity

The date on which a financial obligation or investment becomes due for payment or achieves its full value.

Note Receivable

A written promise that money will be paid by the debtor to the creditor at a certain date in the future.