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Suppose Your Neighbor Likes to Repair Motorcycles in His Front

Question 81

Multiple Choice

Suppose your neighbor likes to repair motorcycles in his front yard during evenings and on weekends, and he earns $400 per week from this work. However, the sight of piles of greasy motorcycle parts and the additional noise and traffic caused by his customers reduces your value of living in this neighborhood by $300 per week. If you have a right to live in peace and quiet, the efficient outcome can be achieved as long as the bargaining costs:


A) are less than $100.
B) are greater than $100.
C) only include opportunity costs.
D) The Coase Theorem assumes zero transaction costs, so the bargaining costs must be zero in order to achieve the efficient outcome.

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