Answer to Question #281112 in Microeconomics for Ali Mammadov

Question

Mick loves playing rock music at high volume. Luciano loves opera and hates rock music. Unfortunately, they are next-door neighbors in an apartment building with paper-thin walls. a. What is the externality here? b. What command-and-control policy might the landlord impose? Could such a policy lead to an inefficient outcome? Could such a policy lead to an inefficient outcome? c. Suppose the landlord lets the tenants do whatever they want. According to the Coase theorem, how might Mick and Luciano reach an efficient outcome on their own? What might prevent them from reaching an efficient outcome? 

Answer 1

a. Externalities here are a sensitive sleep of neighbors and study, work in the first shift

b. It is possible to listen to music at certain hours, in turn. Yes, such a policy can lead to a negative result if the neighbors do not give in to each other.

c. Independently, you can achieve the effect of the desired result if you follow the rules: listen to music at certain hours, with headphones, up to a certain time and not loudly. Lack of respect for each other and neighbors can interfere.