Latoya and Maggie are roommates. Maggie likes to play music in their dorm room every evening. Tonight, Latoya needs to study for her economics exam and would prefer that Maggie not play music. Latoya values silence at $50. Maggie values her music at $20. Assume the roommates can bargain with zero transactions costs. Which of the following is true?
A) It is efficient for Maggie to play her music.
B) Maggie and Latoya will not be able to reach efficiency in this situation.
C) The university should offer a subsidy for noise-cancelling headphones.
D) It is efficient for Maggie to refrain from playing music tonight.
Correct Answer:
Verified
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