John lives in an apartment building and gets a $500 benefit from playing his stereo.Mary,who lives next door to John and often loses sleep due to the loud music coming from John's stereo,bears a $700 cost from the noise.Mary would like to offer John some money to turn down the volume on his stereo.If Mary had to hire a lawyer to draw up the contract,what is the maximum amount she could pay to the lawyer to ensure that both John and Mary would benefit from the agreement?
A) An amount less than $200.
B) An amount between $200 and $500.
C) An amount between $500 and $700.
D) Any amount could result in both parties benefitting from the agreement.

Question

Quizplus · Accepted Answer

The maximum amount Mary could pay to the lawyer is $200. This is because the total benefit from the agreement is $200 ($500 benefit to John - $700 cost to Mary). If Mary pays more than $200 to the lawyer, then she will not benefit from the agreement.

John Lives in an Apartment Building and Gets a $500