Suppose the Problem Is the Stereo Noise in the Dorm

question 9

Multiple Choice

Suppose the problem is the stereo noise in the dorm. On the graph on the next page the amplifier dial numbers are located on the horizontal axis. The vertical axis measures the marginal costs and benefits of various levels of music (noise) . Also measured on the vertical axis is the marginal cost of insulating the walls to prevent the externalities from penetrating the wall. If negotiation costs are zero and she has the property rights to the airwaves, how loud will the music be played?

• A)0
• B)3
• C)4

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