Question

Gretchen is a writer who works from her home. Gretchen lives next door to Randall, the trumpet player for a local band. Randall needs lots of practice to earn his share of the band’s profit, which will amount to $350. Gretchen gets distracted by Randall’s trumpet playing but she needs to get her writing done to earn $570 for her current article. If Randall owns the right to play his music and Gretchen needs to hire a lawyer to help her reach an agreement with Randall, then what price is Gretchen willing to pay the lawyer? a. less than $350 b. less than $920 c. less than $220 d. less than $570

Answer 1

A) less than $350

Step-by-step explanation:

In economics, the Coarse Theorem for conflict resolutions argues that both parties should negotiate an economically optimal solution regardless of the original property rights.

In this case, Randall earns $350 for playing the trumpet, while Gretchen earns $570 for writing an article. Since both things are incompatible, Gretchen must find a way to convince Randall to stop playing the trumpet, either by paying him at least $350 (which equals his economic benefit of playing the trumpet) or by hiring a lawyer that costs her less than $350.

If hiring the lawyer costs more than $350, then Gretchen should just pay Randall.

Answer 2

a. less than $350

Step-by-step explanation:

Since Randall needs lots of practice to earn his share of the band’s profit, which will amount to $350.

Gretchen gets distracted by Randall’s trumpet playing but she needs to get her writing done to earn $570 for her current article.

If Randall owns the right to play his music and Gretchen needs to hire a lawyer to help her reach an agreement with Randall, then the price that Gretchen is willing to pay the lawyer will be less than $350

The reason for the price being less than $350 is based on the simple logic that Gretchen could as well pay Randall his share of the band’s profit, which will amount to $350, for him to stop disturbing her while she writes, than to pay a lawyer that amount and still spend extra time engaging the lawyer.