Question

Assume that your roommate, Linda, is very messy. Suppose she gets a $100 benefit from being messy but imposes a $200 cost on you. What would the erd Coase theorem suggest would be an efficient solution for you? a. to pay your roommate 590 to clean up after herself b. to pay your roommate at least $100 but no more than $200 to clean up after herself c. to pay your roommate at least $201 to clean up after herself d. to charge your roommate at least $100 to have you clean up after her

Answer 1

B) to pay your roommate at least $100 but no more than $200 to clean up after herself

Step-by-step explanation:

According to the Coase theorem, you should work a solution that benefits both Linda and yourself. Since Linda's benefits for being messy = $100, and your costs for her being messy = $200, then you should offer Linda an amount of money that is between $100-$200 so that she cleans her mess.

The Coase theorem states that disputing parties should negotiate an economically optimal solution, regardless of what originated the problem or who had the property rights at the beginning.

In this case Linda is responsible for all the mess but it will not help you to just complain about it, instead you should find an economical solution to the problem.