**Consider a Commercial Space with Two Tenants**An upscale restaurant and a live music venue occupy a shared commercial space. Currently, the restaurant is open serving customers until 10 pm each night, and the venue has music beginning at 9 pm each night.The live music causes a disturbance at the restaurant, harming the restaurant owner's profit. The restaurant owner demands the music venue does not begin operating until 10 pm. The venue owner counters that the restaurant should just close an hour early, at 9 pm.The following are the hourly profits both firms will earn depending on various closing times:- **Scenario A: Both businesses are open between 9 pm and 10 pm** - The restaurant earns $400 in profit. - The venue earns $600 in profit between 9 pm and 10 pm.- **Scenario B: The venue does not open until 10 pm** - The restaurant would earn $1200 in profit between 9 pm and 10 pm. - The venue earns no profit since it is closed during that time.- **Scenario C: The restaurant closes at 9 pm** - The restaurant earns no profits between 9 pm and 10 pm. - The venue's profit is not impacted by the restaurant; they still earn $600 profit in this scenario.**Assume no transaction costs.****Questions:**a) Between the three scenarios, the efficient outcome is Scenario [ Select ] and the most inefficient outcome is Scenario [ Select ].b) Suppose the restaurant has the property rights, meaning if the restaurant loses profit due to the venue, the venue must pay the amount of the restaurant's lost profit. After any and all negotiations, does the Coase Theorem predict the venue will open at 9 pm or 10 pm? [ Select ]c) Suppose the venue has the property rights, meaning the venue is not responsible for any profit lost by the restaurant. After any and all negotiations, does the Coase Theorem predict the venue will open at 9 pm or 10 pm? [ Select ]d) Should, in any scenario, the restaurant pay the venue to stay closed until 10 pm, what range of values represent an improvement to both tenants compared to the status quo? [ Select ]

Economic efficiency suggests an economic state wherein each asset is ideally dispensed to serve…

Consider a commercial space with two tenants. An upscale restaurant and a live music venue. Currently, the restaurant is open serving customers until 10pm each night and the venue has music beginning at 9pm each night. The live music causes a disturbance at the restaurant harming the restaurant owner's profit, so the owner demands the music venue does not begin operating until 10pm. The venue ówner counters that the restaurant should just close an hour early, at 9pm. The following are the hourly profits both firms will earn depending on various closing times. . Scenario A: Both businesses are open between 9pm and 10pm: The restaurant earns $400 in profit and the venue earns $600 in profit between 9pm and 10pm. Scenario B: The venue does not open until 10pm: The restaurant would earn $1200 in profit

Consider a commercial space with two tenants. An upscale restaurant and a live music venue. Currently, the restaurant is open serving customers until 10pm each night and the venue has music beginning at 9pm each night. The live music causes a disturbance at the restaurant harming the restaurant owner's profit, so the owner demands the music venue does not begin operating until 10pm. The venue ówner counters that the restaurant should just close an hour early, at 9pm. The following are the hourly profits both firms will earn depending on various closing times. . Scenario A: Both businesses are open between 9pm and 10pm: The restaurant earns $400 in profit and the venue earns $600 in profit between 9pm and 10pm. Scenario B: The venue does not open until 10pm: The restaurant would earn $1200 in profit

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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