Maria lives next door to Alice. Alice regularly plays loud music, which often disturbs Maria. Maria went over to Alice's house yesterday and asked her to turn down her music because loud music adversely affects her. Alice has complied. Which of the following best describes the economists' view of what has happened?
A. The marginal social benefits of loud music were greater than the marginal private costs of loud music and the problem was solved by Maria persuading Alice to internalize her (Maria's) external costs.
B. The marginal social costs of loud music were greater than the marginal private costs of loud music and the problem was solved by Maria persuading Alice to internalize her (Maria's) external costs.
C. The marginal social costs of loud music were greater than the marginal private costs of loud music and the problem was solved through a reassignment of property rights.
D. The marginal social costs of loud music were greater than the marginal social benefits of loud music and the problem was solved by Maria persuading Alice to internalize her (Maria's) external costs.
E. none of the above
Answer: B
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What happens to the price and quantity sold of a drug when its patent runs out? (i) The price will fall. (ii) The quantity sold will fall. (iii) The marginal cost of producing the drug will rise
a. (i) only b. (i) and (ii) only c. (ii) and (iii) only d. (i), (ii), and (iii)
The economy above has experienced a:
Answer the question on the basis of the following information:
A. declining nominal GDP.
B. rising price level.
C. declining real GDP.
D. rising real GDP.