Problem 3. Company X's factory makes noise that would cost $6000 to quieten. The noise causes company Y next door to lose $8000 in productivity and it would cost company Y $7700 to install noise-proofing that would shut out the noise. Transactions costs are high. a) True or False? Under no liability, Company Y will install the noise-proofing. b) True or False? Under strict liability, Company X will pay to prevent the noise. c) What is the efficient solution to the noise problem (should it be quietened and by who)?
Problem 3. Company X's factory makes noise that would cost $6000 to quieten. The noise causes company Y next door to lose $8000 in productivity and it would cost company Y $7700 to install noise-proofing that would shut out the noise. Transactions costs are high. a) True or False? Under no liability, Company Y will install the noise-proofing. b) True or False? Under strict liability, Company X will pay to prevent the noise. c) What is the efficient solution to the noise problem (should it be quietened and by who)?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Problem 3. Company X's factory makes noise that would cost $6000 to quieten. The noise
causes company Y next door to lose $8000 in productivity and it would cost company Y $7700
to install noise-proofing that would shut out the noise. Transactions costs are high.
a) True or False? Under no liability, Company Y will install the noise-proofing.
b) True or False? Under strict liability, Company X will pay to prevent the noise.
c) What is the efficient solution to the noise problem (should it be quietened and by who)?
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