Problem 4 Consider two adjacent businesses: a music studio and a tutoring center. Rock music from the studio can be heard in the tutoring center, causing concentration difficulties for its patrons. The table below shows the total value of each business at various levels of noise. Assume the owners of the two organizations can bargain costlessly.

Problem 4
Consider two adjacent businesses: a music studio and a tutoring center. Rock music from the studio can be heard in the tutoring center, causing concentration difficulties for its patrons. The table below shows the total value of each business at various levels of noise. Assume the owners of the two organizations can bargain costlessly.

a) If the music is legal, what is the outcome of the situation, in terms of the level of noise? What is the potential range of payments that might be made and by whom?

b) If the music is illegal (restricted to 10), but enforcement is only in response to complaints, how does your answer in part (a) change?

Problem 5

Problem 2, p114 in text

Consider a pollution problem involving a paper mill located on a river and a commercial salmon fishery operating on the same river. The fishery can operate at one of two locations: upstream (above the mill) or downstream (in the polluted part of the river).
Pollution lowers profits for the fishery: without pollution, profits are $300 upstream and
$500 downstream; with pollution, profits are $200 upstream and $100 downstream. The mill earns $500 in profit, and the technology exists for it to build a treatment plant at the site that completely eliminates the pollution, but at a cost of $200. There are two possible assignments of property rights: (i) the fishery has the right to a clean river and (ii) the mill has the right to pollute the river.

a. What is the efficient outcome (the maximum of total joint profit)?

b. What are the outcomes under the two different property rights regimes, when there is no possibility of bargaining?

c. How does your answer to (b) change when the two firms can bargain costlessly?

find the cost of your paper