Jones and Smith live in the same apartment building. Jones loves ...

[wrbasek0]

Jones and Smith live in the same apartment building. Jones loves to play his opera recordings so loudly that Smith can hear them. Smith hates opera. Jones receives 100 of benefits from his music and Smith suffers 60 of damages. a.
 
  From an efficiency perspective, should Jones be allowed to play his opera CDs? b. Suppose the apartment building does not have any rules about noise. Jones and Smith can bargain at zero cost. Will they reach an agreement where Jones gives up his beloved operas? c. Now suppose the apartment building passes a rule that says residents are not allowed to play music their neighbors can hear if any of the neighbors object. As before, Jones and Smith can bargain at zero cost. Will Jones be allowed to play his music?

Question 2

When the CPI increases from 200 in 2010 to 210 in 2011 and the nominal wage rate is constant at 10 an hour, the real wage rate ______.
 
  A. increases by 10 percent
  B. increases to 15 an hour
  C. decreases by 5 percent
  D. is 10 an hour

[tandmlomax84]

Answer to Question 1

a. The benefits from the music (100) are greater than the costs (60). Therefore, from an efficiency perspective Jones should continue to play his recordings.
b. The largest offer Smith would make to Jones to persuade Jones to give up his music would be 60 . The smallest offer Jones would accept is 100 . Therefore they will not reach an agreement where Jones gives up his operas.
c. The largest offer Jones would make to Smith to persuade Smith to allow him to play his music is 100 . The smallest offer Smith would accept is 60 . Therefore they will reach an agreement where Jones continues to play his operas.

Answer to Question 2

C The nominal wage rate falls from (10  200)  100, which is 5.00, to (10  210)  100, which is 4.76, a fall of 5 percent.

[wrbasek0]

Thank you

[tandmlomax84]

No problemo