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Assume that your roommate is very messy. According to campus policy, you have a right to live in an uncluttered apartment. Suppose she gets an $80 benefit from being messy but imposes a $60 cost on you. The Coase theorem would suggest that an efficient solution would be for your roommate to apay you at least $60 but less than $80 to live with the clutter. bdemand payment of at least $60 but no more than $80 to clean up after herself. cstop her messy habits or else move out. dcontinue to be messy and force you to move out.

Question

Assume that your roommate is very messy. According to campus policy, you have a right to live in an uncluttered apartment. Suppose she gets an 80benefitfrombeingmessybutimposesa80 benefit from being messy but imposes a 60 cost on you. The Coase theorem would suggest that an efficient solution would be for your roommate to apay you at least 60butlessthan60 but less than 80 to live with the clutter. bdemand payment of at least 60butnomorethan60 but no more than 80 to clean up after herself. cstop her messy habits or else move out. dcontinue to be messy and force you to move out.

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Solution

The Coase theorem suggests that conflicts over resource use can be resolved through bargaining and negotiation. In this case, the efficient solution would be for your roommate to pay you at least 60butlessthan60 but less than 80 to live with the clutter. This is because the cost she imposes on you by being messy is 60,andherbenefitfrombeingmessyis60, and her benefit from being messy is 80. Therefore, as long as she compensates you for the cost she imposes on you (at least 60),andaslongastheamountshepaysislessthanherbenefitfrombeingmessy(lessthan60), and as long as the amount she pays is less than her benefit from being messy (less than 80), both of you would be better off. This is option (a) in your question.

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