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Economics 1st Edition by Dean Karlan,Jonathan Morduch
Edition 1ISBN: 978-0073511498Economics 1st Edition by Dean Karlan,Jonathan Morduch
Edition 1ISBN: 978-0073511498 Exercise 7
Your neighbor never mows her lawn. You don't have any legal right to force her to mow, but the mess in her front yard is making your neighborhood unsightly and reducing the value of your house. The reduction in the value of your house is $5,000, and the value of her time to mow the lawn once a week is $1,000. Suppose you offer her a deal in which you pay her $3,000 to mow. How does this deal affect surplus?
a. The deal increases only your surplus.
b. The deal increases only your neighbor's surplus.
c. The deal increases both your surplus and your neighbor's.
d. The deal increases your surplus but decreases your neighbor's.
e. The deal increases your neighbor's surplus but decreases yours.
f. The deal does not affect surplus.
a. The deal increases only your surplus.
b. The deal increases only your neighbor's surplus.
c. The deal increases both your surplus and your neighbor's.
d. The deal increases your surplus but decreases your neighbor's.
e. The deal increases your neighbor's surplus but decreases yours.
f. The deal does not affect surplus.
Explanation
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Private cost:
Private cost refers to th...
Economics 1st Edition by Dean Karlan,Jonathan Morduch
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