Monte owns a dog; the dog's barking annoys Monte's neighbor,Teresa.Suppose that the benefit of owning the dog is worth $200 to Monte and that Teresa bears a cost of $400 from the barking.Assuming Monte has the legal right to keep the dog,a possible private solution to this problem is that

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A possible private solution to this problem is for Teresa to compensate Monte for giving the dog away to his parents who live on an isolated farm. Since Monte values the dog at $200, and Teresa bears a cost of $400 from the barking, a compensation of at least $300 (which is the difference between these two values) will potentially make both parties better off. Therefore, choice C is the best option. Choices A and B either do not provide enough compensation or over-compensate, respectively. There could be other possible private solutions, but they are not listed among the answer choices. Choice D is not correct, as private solutions can always potentially improve the situation by making both parties better off.

Monte Owns a Dog; the Dog's Barking Annoys Monte's Neighbor,Teresa