Multiple Choice
Roberto and Thomas live in a university hall of residence. Roberto values playing loud music at a value of €100. Thomas values peace and quiet at a value of €150. Which of the following statements is true about an efficient solution to this externality problem if Roberto has the right to play loud music and if there are no transaction costs?
A) Thomas will pay Roberto between €100 and €150 and Roberto will continue to play loud music.
B) Roberto will pay Thomas €150 and Roberto will continue to play loud music.
C) Thomas will pay Roberto between €100 and €150 and Roberto will stop playing loud music.
D) Roberto will pay Thomas €100 and Roberto will stop playing loud music.
Correct Answer:
Verified
Correct Answer:
Verified
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