Beth can earn 7,500 by renting out her house. However, her ...

[KimWrice]

Beth can earn 7,500 by renting out her house. However, her neighbor keeps a pet dog that chases away whoever comes looking for the house. Because her neighbor has a right to keep his pet untied, Beth is unable to find a tenant.
 
  What is the efficient outcome in this case if her neighbor values keeping his pet free for 1,500?

Question 2

In an English auction, the winner pays a price equal to ________.
 
  A) the value of the highest bid
  B) the value of the lowest bid
  C) his value for the good
  D) the value of the second-highest bid

[jojobee318]

Answer to Question 1

An efficient outcome in this case can be achieved if Beth strikes a private deal with her neighbor convincing him to keep his pet indoors. Because Beth can earn 7,500 by renting out her house and her neighbor values keeping her pet outdoors at 1,500, total well-being can be increased if Beth pays her neighbor an amount between 1,500 and 7,500 to keep his pet indoors.

Answer to Question 2

A

[KimWrice]

Gracias!

[mjenn52]

Great answer, keep it coming