1 band No bands 2 bands 3 bands 200 Bar owner 100 300 benefits 125 Tenants costs 75 400

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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There is a bar on Off‐Main Street called the Rock‐n‐Roll Bar. All the people that go to that bar like to listen to rock‐n‐roll music, and they love live bands. If the bar owner brings bands in to play music on a Saturday night, she will make a lot of money. However there are tenants in this building who get annoyed by the loud music. The benefits/costs to the owner/tenants of having zero, one, two or three bands on a Saturday night are listed in the attached table.

Assume the tenants have the right to be free of loud music enforced through a property rule. If transaction costs were $90, split between the bar owner and the tenants, how many bands would play? What would social welfare be?

A) Two bands would play and social welfare would be 100

B) Two bands would play and social welfare would be 75

C) No bands would play and social welfare would be -15

D) No bands would play and social welfare would be 0

E) One band would play and social welfare would be -190

1 band
No bands
2 bands
3 bands
200
Bar owner
100
300
benefits
125
Tenants costs
75
400
Transcribed Image Text:1 band No bands 2 bands 3 bands 200 Bar owner 100 300 benefits 125 Tenants costs 75 400
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