Suppose the installation of sound absorbing materials in the walls of an auto body shop would cost $4,000, and would generate $25,000 in increased property values for an adjacent neighbor. Completely reducing all noise would require extensive retrofitting, costing $100,000, and would generate $30,000 increase in property values for the adjacent neighbor. Thus there are net social benefits to

installing the sound-absorbing materials. Which of the following would be consistent with the Coase Theorem?
a. If the area is zoned industrial and the shop has the right to emit noise, the efficient solution would be realized if the two parties negotiated and the neighbor bought sound-absorbing materials for the shop.
b. If the area is zoned industrial and the shop has the right to emit noise, the efficient solution would be realized when the neighbor appealed to the EPA for regulations requiring zero noise emissions and thus complete retrofitting of the shop.
c. If the area is zoned residential, and the neighbor has the right to a relatively quiet environment, the efficient solution would be realized by requiring the shop owner and the building owner to share the cost of reducing noise emissions to zero.
d. If the area is zoned residential, and the neighbor has the right to a relatively quiet environment, the efficient solution would be realized by requiring the neighbor to completely retrofit the building to reduce noise emissions to zero.

a