Dick owns a dog whose barking annoys Dick's neighbor Jane.Suppose that the benefit of owning the dog is worth $500 to Dick and that Jane bears a cost of $700 from the barking.Assuming Dick has the legal right to keep the dog,a possible private solution to this problem is that

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This solution involves a transaction where Jane pays Dick to give the dog to his parents who live on an isolated farm, which eliminates the cost borne by Jane while allowing Dick to retain the benefit of owning the dog. This creates a win-win scenario where both parties are better off. Option A requires Jane to bear a cost without any benefit, and option B would require Dick to bear a cost without any significant change in the situation. Option D is incorrect as there is a private transaction that could improve the situation.

Dick Owns a Dog Whose Barking Annoys Dick's Neighbor Jane