A Metal Stamping Factory Moves Next to a Day Care

question 171

Multiple Choice

A metal stamping factory moves next to a day care center.Noise from the factory makes it impossible for the kids to take a nap.Which of the following is likely to be true according to the Coase theorem?

• A)The factory should move.
• B)The day care center should move.
• C)The factory should install sound insulation.
• D)The day care center should install sound insulation.
• E)An optimal solution cannot be achieved unless the costs are given.

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Definitions:

Demand

The willingness and financial capacity of individuals to buy goods and services at certain price levels.

Equilibrium Price

The price at which the quantity of a good or service demanded by consumers equals the quantity supplied by producers, resulting in a stable market condition.

Equilibrium Quantity

The quantity of goods or services that is supplied and demanded at the equilibrium price in a market.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers over a range of prices.