Monte owns a dog; the dog’s barking annoys Monte’s neighbor, Teresa. Suppose that the benefit of owning the dog is worth $200 to Monte and that Teresa bears a cost of $400 from the barking. Assuming Monte has the legal right to keep the dog, a possible private solution to this problem is that a.Teresa pays Monte $150 to give the dog to his parents who live on an isolated farm. b.Monte pays Teresa $350 for her inconvenience. c.Teresa pays Monte $300 to give the dog to his parents who live on an isolated farm. d.There is no private transaction that would improve this situation.

The private solution to this problem aims to find a mutually beneficial arrangement between Monte…

Answered: Monte owns a dog; the dog’s barking…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Monte owns a dog; the dog’s barking annoys Monte’s neighbor, Teresa. Suppose that the benefit of owning the dog is worth $200 to Monte and that Teresa bears a cost of $400 from the barking. Assuming Monte has the legal right to keep the dog, a possible private solution to this problem is that

	a.	Teresa pays Monte $150 to give the dog to his parents who live on an isolated farm.
	b.	Monte pays Teresa $350 for her inconvenience.
	c.	Teresa pays Monte $300 to give the dog to his parents who live on an isolated farm.
	d.	There is no private transaction that would improve this situation.