Maria Lives Next Door to Alice

Multiple Choice

Maria lives next door to Alice. Alice regularly plays loud music, which often disturbs Maria. Maria went over to Alice's house yesterday and asked her to turn down her music because loud music adversely affects her. Alice has complied. Which of the following best describes the economists' view of what has happened?

A) The marginal social benefits of loud music were greater than the marginal private costs of loud music and the problem was solved by Maria persuading Alice to internalize her (Maria's) external costs.
B) The marginal social costs of loud music were greater than the marginal private costs of loud music and the problem was solved by Maria persuading Alice to internalize her (Maria's) external costs.
C) The marginal social costs of loud music were greater than the marginal private costs of loud music and the problem was solved through a reassignment of property rights.
D) The marginal social costs of loud music were greater than the marginal social benefits of loud music and the problem was solved by Maria persuading Alice to internalize her (Maria's) external costs.