Suppose the Problem Is the Stereo Noise in the Dorm

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. If she has the property rights with negotiation impossible, then what will the outcome be?

A) You will shut your stereo off.
B) You will play to 3 and insulate so that the noise does not reach her.
C) You will play to 6 and she will insulate her walls.
D) You will play to 4 and she will absorb the noise even though she dislikes it.