Paul owns a mushroom farm. The smell from the farm reduces the value of adjacent houses by a total of $20 000. Suppose that the benefit of the mushroom farm to Paul is $30 000. Assuming that Paul has the legal right to own the farm, a possible private solution to this problem is that:
A) Adjacent property owners pay Paul $20 000 to stop farming mushroom
B) there is no private solution that would improve this situation
C) Paul pays the adjacent property owners $30 000 to compensate them for the loss in house values
D) adjacent property owners pay Paul $25 000 to stop farming mushrooms

Question

Paul owns a mushroom farm. The smell from the farm reduces the value of adjacent houses by a total of $20 000. Suppose that the benefit of the mushroom farm to Paul is $30 000. Assuming that Paul has the legal right to own the farm, a possible private solution to this problem is that: 
A) Adjacent property owners pay Paul $20 000 to stop farming mushroom
B) there is no private solution that would improve this situation
C) Paul pays the adjacent property owners $30 000 to compensate them for the loss in house values
D) adjacent property owners pay Paul $25 000 to stop farming mushrooms

Quizplus · Accepted Answer

The Answer of Paul owns a mushroom farm. The smell from the farm reduces the value of adjacent houses by a total of $20 000. Suppose that the benefit of the mushroom farm to Paul is $30 000. Assuming that Paul has the legal right to own the farm, a possible private solution to this problem is that: 
A) Adjacent property owners pay Paul $20 000 to stop farming mushroom
B) there is no private solution that would improve this situation
C) Paul pays the adjacent property owners $30 000 to compensate them for the loss in house values
D) adjacent property owners pay Paul $25 000 to stop farming mushrooms

Paul Owns a Mushroom Farm