Ty Lives in an Apartment Building and Gets a Benefit

question 383

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 Olivib.
• 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.

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Definitions:

Order of Operations

A set of rules used in math to determine the sequence in which operations should be performed.

Circular References

A situation in formulas where a reference is made back to the original cell, potentially causing an error or infinite loop.

Direct Circular References

An error condition in formulas where two or more elements reference each other in a loop, causing a calculation problem.

Indirect Circular References

In spreadsheets, a situation where a formula refers back to its own cell directly or through a chain of references, potentially causing errors.