Question

Brian loves opera and hates rock 'n' roll. Tim loves playing rock 'n' roll music at high volume. Unfortunately, they are next-door neighbors in an apartment building with paper-thin walls.

In this case, (Brian/Tim) imposes a (Positive/Negative) externality on his neighbor in the form of noise pollution.
What command-and-control policy might the landlord impose?
(a) A rule that music could not be played above a certain decibel level
(b) A rental subsidy for those tenants who do not own any musical devices
(c) A tax on rent for those tenants who own speakers
Suppose the landlord lets the tenants do whatever they want.
True or False: According to the Coase theorem, Tim and Brian might not be able to reach an agreement if the transaction costs are high.
(True)
(False)

Answer 1

Tim imposes a Negative externality on his neighbor in the form of noise pollution.

The command-and-control policy might the landlord impose is : a) A rule that music could not be played above a certain decibel level

(True)According to the Coase theorem, Tim and Brian might not be able to reach an agreement if the transaction costs are high.

Step-by-step explanation:

As given ,

Brian loves opera and hates rock 'n' roll. Tim loves playing rock 'n' roll music at high volume.

In this case, Tim imposes a Negative externality on his neighbor in the form of noise pollution.

Because Tim's rock 'n' roll music disturb Brian and it effects negatively because due to Tim's music , Brian is unable to listen opera properly

Now,

The command-and-control policy might the landlord impose is :

a) A rule that music could not be played above a certain decibel level

Now,

If the landlord lets the tenants do whatever they want.

According to the Coase theorem, Tim and Brian might not be able to reach an agreement if the transaction costs are high.

It is True

Because if transaction cost is low , then Tim can pay compensation to Brian for high volume of music . But if transaction cost is high then they can not do any negotiation.