The payment made to an owner of a resource in excess of the opportunity cost of the resource is
a. economic rent
b. economic profit
c. wages
d. interest
e. opportunity cost
Question 2
A metal-stamping factory moves next to a day care center. Noise from the factory makes it impossible for the kids to nap. It would cost the factory 5 million to move; it would cost 1 million for the day care center to move. Sound insulation for the factory costs 1 million; insulation for the day care center costs 200,000 . The court initially determines that the day care center has the property right and orders the factory to purchase insulation for the day care. But on appeal the factory is awarded the property right. How would the optimal solution to this problem change after the appeals court decision?
a. The insulation would still be bought, but it would be bought by the day care center, a result consistent with the Coase theorem.
b. Insulation for the factory would be bought instead of insulation for the day care center, a result consistent with the Coase theorem.
c. Insulation for the day care center would still be bought, but it would be bought by the factory, a result consistent with the Coase theorem.
d. Insulation for the factory would be bought instead of insulation for the day care center, a result inconsistent with the Coase theorem.
e. The day care center would move instead of buying insulation, a result consistent with the Coase theorem.
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