Question

Betty's cat causes Suzy to sneeze. Betty values her cat's companionship at $300 per year. The cost to Suzy of tissues and her allergy medication is $350 per year. Based on the Coase theorem,

(A) Betty should pay Suzzy $350 for tissues and allergy medication.
(B) Suzy should pay Bety $325 to give away her cat.
(C) Betty should pay Suzy $400 so that she may keep her cat.
(D) Suzy should move.

Answer 1

(B) Suzy should pay Bety $325 to give away her cat.

Step-by-step explanation:

Based on the Coase theorem, Suzy should pay Bety $325 to give away her cat.