Suppose the Problem Is the Stereo Noise in the Dorm

question 32

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. What if negotiation is impossible and you have the rights to play?

• A)You will play at 10 and insulate your walls.
• B)She will insulate her walls and you will play at 10.
• C)You will play at 6 and she will suffer through the listening of your playing.
• D)You will play at 3 and she will listen to the music that comes into her apartment.

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Definitions:

Residual Income

This is the amount of income that exceeds the minimum rate of return.

Investment Opportunity

An option to invest capital with the expectation of achieving a financial return.

Delivery Cycle Time

The total time taken from the receipt of a customer order to the delivery of the product, indicating the efficiency of the entire supply chain process.

Residual Income

The income that remains after deducting all costs, including opportunity costs, from business operations or investments.