Erick and Sandile live in a university hall of residence. Erick values playing loud music at R100. Sandile values peace and quiet at R150. Which of the following statements is true about an efficient solution to this externality problem if Erick has the right to play loud music and if there are no transaction costs?
A) Sandile will pay Erick between R100 and R150 and Erick will continue to play loud music.
B) Erick will pay Sandile R150 and Erick will continue to play loud music.
C) Sandile will pay Erick between R100 and R150 and Erick will stop playing loud music.
D) Erick will pay Sandile R100 and Erick will stop playing loud music.
Correct Answer:
Verified
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