(Table: Property Values) a Local University Is Located in a Residential

question 338

Multiple Choice

(Table: Property Values) A local university is located in a residential neighborhood. Property rights are clearly defined for both the residents of the neighborhood and the university. The university would like to build a five-level parking garage on its property, but the neighbors argue that it will create too many nuisances and thus hurt their property values. The table contains data on the parking fee revenue the university expects to earn, as well as the expected impact on average neighborhood property values. According to the Coase theorem, the optimum level of floors in the parking garage should be
$\begin{array}{|c|c|c|}\hline \text { Number of Levels } & \text { Parking Fee Revenue } & \begin{array}{c}\text { Average Property } \\\text { Value in the } \\\text { Neighborhood }\end{array} \\\hline 0 & \$ 0.00 & \$ 310,000.00 \\\hline 1 & \$ 50,000.00 & \$ 305,000.00 \\\hline 2 & \$ 90,000.00 & \$ 295,000.00 \\\hline 3 & \$ 120,000.00 & \$ 280,000.00 \\\hline 4 & \$ 140,000.00 & \$ 260,000.00 \\\hline 5 & \$ 150,000.00 & \$ 235,000.00 \\\hline\end{array}$

• A) one.
• B) two.
• C) three.
• D) four.

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