Answer:
The doctor can pay for the technology that eliminates noise.
Step-by-step explanation:
In a Coase equilibrium , both parties will seek a solution that is economically profitable for both of them regardless of the initial position each party held.
In this case, the doctor is trying to save as much as he can and avoid paying $400 extra per month, while the mechanic's only incentive to reduce noise is to retain the tenant (doctor).
If the doctor is willing to pay for the new technology that eliminates noise on the surrounding offices, then both will win:
- the doctor will win = $400 - $325 = $75 per month
- the mechanic's situation is not affected, but the tenant will remain