A Local Band Practices Next Door to Joe,who Enjoys a Peaceful

question 88

Essay

A local band practices next door to Joe,who enjoys a peaceful and quiet environment.The benefit (in present value terms)to the band of practicing is $100 and the cost (in present value terms)to Joe of the band practicing is $150.
a)What will happen if the band is held legally liable for their noise damage? Assume this is the only place they can practice.
b)What will happen if the band is not held legally liable for their noise damage? Assume this is the only place they can practice.
c)Now let the benefit (in present value terms)to the band of practicing be $150 and the cost (in present value terms)to Jack of the noise be $100.What will happen when the band is held legally liable for their noise damage and when they are not? Assume this is the only place they can practice.
d)Again let the benefit (in present value terms)to the band of practicing be $100 and the cost (in present value terms)to Jack of the noise be $150.But now the band can pay to make their apartment soundproof at a cost of $40.What will happen when the band is held legally liable for their noise damage and when they are not?

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Definitions:

Highly Automated System

A system incorporating advanced technologies to minimize human intervention in its operations.

Step-Down Method

A cost allocation method used in accounting to allocate indirect costs to different departments or products sequentially.

Allocate Total Support

The process of assigning the full amount of indirect costs or overheads to specific activities, departments, or products.

Department Costs

Refers to the total expenses incurred by a specific department within a business, covering materials, labor, and overhead.